Ready for Financial Confidence?
You must be wondering what the new 2026 tax brackets from the IRS actually mean for your paycheck. Every year, the IRS updates tax brackets to adjust for inflation and new laws that reshape the tax landscape.
With the One Big Beautiful Bill Act (OBBBA) now fully in effect, 2026 brings some significant changes. By the end of this blog, you’ll know exactly what the 2026 tax brackets are, how they work, and what they mean for you.
What Are Tax Brackets (and Why Do They Change)?
Think of tax brackets like a staircase. Each “step” represents a different percentage of tax. As your income climbs, the earnings on each incremental step is taxed at that specific rate.
If you’re single and earn $70,000, your income isn’t all taxed at one rate. The first portion is taxed at 10%, the next portion at 12%, and only the remaining amount falls into the 22% bracket. You’re not paying 22% on the full $70,000 — just on the dollars that land in that bracket. That’s what a progressive tax system means, and it’s why earning more doesn’t make you “lose money.”Every year, the IRS adjusts the brackets to keep pace with inflation, so people don’t get pushed into higher tax rates just because of cost-of-living increases. This concept is called “bracket creep.”
2026 Tax Brackets
Below are the 2026 federal income tax brackets, as released by the IRS:
How Do Tax Brackets Work in 2026?
Say you’re single and earn $60,000 in taxable income in 2026. Here’s how the tax will apply:
- The first $12,400 is taxed at 10%
- The next $37,999 (from $12,401 to $50,400) is taxed at 12%
- The last $9,600 (from $50,401 to $60,000) is taxed at 22%
Your effective tax rate (the average you actually pay) will be much lower than 22%. Remember, you’re not paying 22% on all $60,000; rather, you’re paying 22% only on the portion above $50,400.
So, your total tax owed would roughly be:
(10% × $12,400) + (12% × $37,999) + (22% × $9,600) = around $8,184 total in tax
That’s about a 13.6% effective tax rate, which is much less than most people expect.
What the 2026 Tax Brackets Mean for You
The higher income thresholds for 2026 mean you will keep more of your paycheck compared to 2025, even if your nominal salary goes up.
To make the most of the changes in 2026 tax brackets, here’s what you can do:
- Check your withholding: If you’re a W-2 employee, make sure your employer has your latest Form W-4 so you’re not over- or under-withheld.
- Adjust your estimated tax payments if you’re self-employed or a side hustler.
- Review your deductions and credits, especially if you qualify for the new tip or overtime exemptions.
- Plan early to accommodate the bracket changes, as it can affect estimated payments, retirement contribution strategies, and the timing of business expenses.
Want to minimize your tax liability? Our proactive experts thoroughly analyze your situation and customize tax plans to your needs and goals.
What’s New in 2026
The IRS officially released the 2026 tax brackets along with other inflation adjustments. These reflect both regular annual changes and major updates from the One Big Beautiful Bill Act (OBBBA), which made several tax rules permanent and introduced new provisions.
Here’s the changes you should know:
1. The Standard Deduction Is Higher
Your standard deduction is the amount of income the IRS doesn’t tax before considering the brackets.
Thanks to inflation adjustments and the OBBBA, the new 2026 standard deduction amounts are:
- $32,200 for married couples filing jointly
- $16,100 for single filers or married individuals filing separately
- $24,150 for heads of household
If you’re married filing jointly and earned $80,000 in 2026, only about $47,800 of that income would be taxed after the standard deduction. That means more of your income stays tax-free, and your overall tax bill drops slightly.
2. Some Credits and Exemptions Got Bigger
The IRS also adjusted several tax credits and exclusions that reduce your taxable income or increase your refund.
Here are some highlights for 2026:
- Earned Income Tax Credit (EITC): The maximum credit rises to $8,231 for families with three or more children.
- Child Tax Credit: Increased to $2,200 per child, with a refundable portion of $1,700.
- Foreign Earned Income Exclusion: Increased to $132,900, which helps U.S. citizens working abroad exclude more of their income from U.S. taxes.
- Adoption Credit: Up to $17,670, with a portion (about $5,120) refundable under OBBBA.
- New Senior Deduction: Taxpayers age 65 or older can claim a new $6,000 deduction, phased out at higher incomes.
These adjustments might sound small, but together they help offset inflation and provide more breathing room for families and working professionals.
What’s Not Changing?
Some parts of the tax code are now locked in permanently under the One Big Beautiful Bill, meaning they won’t change year-to-year.
- Personal exemptions remain at $0. They were eliminated years ago and made permanent.
- The SALT (State and Local Tax) deduction cap has been increased to $40,000 for most taxpayers in 2026.
- Itemized deduction limits are still gone for most taxpayers. However, high earners (in the top 37% bracket) will now see a cap on how much benefit they can get from itemizing deductions like mortgage interest or charitable donations.
Note: This isn’t a return of the old “Pease limitation.” Instead, it’s a new calculation that effectively reduces the value of itemized deductions for income that falls within the 37% bracket. For these taxpayers, the maximum tax savings from their deductions is effectively capped at 35%, making tax planning more important than ever.
3. Estate and Gift Tax Adjustments
If you’re thinking about legacy planning, a few key updates apply here too:
- The estate tax exemption rose to $15 million for 2026.
- The annual gift exclusion remains at $19,000, meaning you can gift up to that amount per person without triggering gift tax.
These won’t affect most taxpayers directly, but they’re notable for business owners and investors doing long-term wealth planning.
4. Health and Workplace Benefits
A few workplace-related numbers also ticked up:
- Health FSA contribution limit: $3,400 (up $100 from 2025).
- Parking and transit benefits: $340 per month (up from $325 in 2025).
- Medical Savings Accounts:
- For self-only coverage, the annual deductible must be between $2,900 and $4,350, with a maximum out-of-pocket limit of $5,850.
- For family coverage, the annual deductible must be between $5,850 and $8,550, with a maximum out-of-pocket limit of $10,700.
If your employer offers these benefits, the new limits mean you can shield a bit more income from taxes by contributing pre-tax.
Final Thoughts
Both inflation and permanent changes from the OBBBA shape the IRS’s new 2026 tax brackets. While not a complete overhaul, the shifts can impact your take-home pay and planning, especially if you’re self-employed, a senior, or have children.
Staying informed helps you plan smarter, avoid surprises, and maximize what you keep.
If you want to see how the 2026 brackets affect your specific situation, Attracct can help you run the numbers and make sure your tax plan is optimized before next filing season.
FAQs
What are the 2026 tax brackets?
They’re the income ranges that determine what percentage of tax you pay at each level of income. There are seven rates for 2026, from 10% to 37%.
Why did the IRS change the tax brackets?
To adjust for inflation and apply major updates from the One Big Beautiful Bill Act (OBBBA), which made several past provisions permanent and introduced new ones.
Will my taxes go up in 2026?
Not necessarily. Because of inflation indexing and the new OBBBA provisions like the Senior Deduction, most people will see little to no change — and some may even pay slightly less.
Do these changes affect my state taxes?
No, state tax systems have their own brackets and rules.
How can I know what bracket I’m in?
Look up your taxable income (after deductions) and compare it to the 2026 IRS table above.
