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The IRS has released its annual inflation adjustments for tax year 2027, and the headline is good news for most paycheques: all seven federal income tax brackets move higher by about 3.2%, the standard deduction rises, and the child tax credit climbs — which means that someone earning the same income next year will likely owe slightly less in tax. The changes were announced on Thursday in Revenue Procedure 2026-35, covering nearly 70 tax provisions.
The new brackets
The seven federal income tax rates themselves do not change — they stay at 10%, 12%, 22%, 24%, 32%, 35% and 37%. What changes is where each rate kicks in. For 2027, the top rate of 37% applies to single filers with taxable income above $661,375, and to married couples filing jointly above $793,650 — nearly $25,000 higher than this year for a couple. The other thresholds rise in step: 35% above $264,550 for singles ($529,100 for couples), 32% above $208,325 ($416,650), 24% above $109,125 ($218,250), 22% above $52,025 ($104,050), and 12% above $12,800 ($25,600). The lowest 10% rate covers income up to $12,800 for singles and $25,600 for couples.
Remember how brackets actually work: only the dollars inside each band are taxed at that band's rate. A single filer earning $60,000, for example, pays 22% only on the slice between $52,025 and the next threshold — everything below that is taxed at the lower 10% and 12% rates.
The standard deduction and the child tax credit
The standard deduction — the fixed amount taxpayers subtract from income before tax is calculated, which about nine in ten taxpayers take — rises for every filing status. For married couples filing jointly it climbs to $33,200, up $1,000 from 2026. For single filers it rises to $16,600, up $500, and for heads of household it reaches $24,925, up $775. Taxpayers aged 65 or older, or who are blind, can claim an additional $1,700 — or $2,100 if unmarried.
The maximum child tax credit increases to $2,300 per child for 2027, up $100 from $2,200. The lifetime gift and estate tax exclusion rises to $15.48 million per person, up from $15 million. And the cap on the state and local tax deduction — the SALT deduction — gets a special 1% annual adjustment, rising to $40,804 for 2027. Personal exemptions remain at zero.
Why the numbers moved — and when they apply
The adjustments are required by law and based on formulas tied to inflation, but this year's figures also reflect provisions of the tax law commonly called the One Big Beautiful Bill Act — which the IRS refers to as the Working Families Tax Cuts — including making the higher standard deduction amounts permanent. Retirement-account limits are adjusted separately and will be announced later this autumn.
One detail that trips people up every year: these are the numbers for income earned in 2027, for tax returns filed in 2028 — not the return due in April 2027. If your pay stays flat next year, the wider brackets and bigger standard deduction should trim your bill slightly. If your income rises faster than inflation, the benefit shrinks — which is exactly what the system is designed to do. For the wider economic picture, see our reports on Wall Street's split reaction to the midterms and the Nasdaq's slide into correction.