IRS Announces 2027 Tax Brackets, Raises Standard Deduction to $33,200 for Married Couples
The Internal Revenue Service has announced its annual inflation adjustments for the 2027 tax year, raising the standard deduction, increasing income thresholds for federal tax brackets and expanding several tax credits. Most of the changes will apply to tax returns filed in 2028.
The announcement, issued Nov. 5, covers nearly 70 tax provisions. The details are outlined in Revenue Procedure 2026-35.
For married couples filing jointly, the standard deduction will increase to $33,200, up $1,000 from 2026. The deduction for single taxpayers and married individuals filing separately will rise to $16,600, while heads of household will be eligible for a $24,925 deduction.
The seven federal income tax rates will remain unchanged, ranging from 10% to 37%. However, the income thresholds at which each rate applies will increase. The brackets are based on taxable income, not total earnings, and each rate applies only to the portion of income falling within that bracket.
New Income Tax Brackets
For single taxpayers, the 10% rate will apply to taxable income of up to $12,800. The 12% rate will apply to income above $12,800 and up to $52,025, while the 22% rate will cover income above $52,025 and up to $109,125.
The 24% rate will apply to income above $109,125 and up to $208,325. The 32% rate will cover income above $208,325 and up to $264,550, and the 35% rate will apply to income above $264,550 and up to $661,375. Taxable income exceeding $661,375 will be taxed at the top rate of 37%.
For married couples filing jointly, the 10% rate will apply to taxable income of up to $25,600. The 12% rate will cover income above $25,600 and up to $104,050, while the 22% rate will apply to income above $104,050 and up to $218,250.
Joint filers will pay a 24% rate on income above $218,250 and up to $416,650, and a 32% rate on income above $416,650 and up to $529,100. The 35% rate will apply to income above $529,100 and up to $793,650. Income exceeding $793,650 will be subject to the 37% rate.
Larger Tax Credits for Families
The maximum Child Tax Credit will increase by $100 to $2,300 in 2027. The maximum refundable portion of the credit will also rise by $100, reaching $1,800.
The maximum Earned Income Tax Credit for eligible taxpayers with three or more qualifying children will increase to $8,496, up from $8,231 in 2026. The amount taxpayers receive depends on their income, filing status and family circumstances.
The maximum adoption credit will rise to $18,250, compared with $17,670 in 2026. Of that amount, up to $5,280 may be refundable.
IRS Chief Executive Officer Frank J. Bisignano said the adjustments would increase tax benefits available under provisions the agency refers to as the Working Families Tax Cuts.
“Hardworking American taxpayers will continue to benefit from the Working Families Tax Cuts (WFTC) and will see WFTC credits and deductions increase with this adjustment,” Bisignano said.
“American individuals and businesses will see increased tax benefits next tax year ranging from an increase in the standard deduction and the Child Tax Credit for families, and a boost to the amount that can be expensed by businesses,” he added.
Higher Limits for Workplace and Business Benefits
Employees who contribute to health flexible spending arrangements through voluntary salary reductions will be subject to an annual limit of $3,500 in 2027, an increase of $100. For plans that allow unused funds to carry over, the maximum carryover amount will rise by $20 to $700.
The monthly limit for qualifying transportation fringe benefits will increase to $350. The separate monthly limit for qualified parking benefits will also rise to $350, up $10 from 2026.
Businesses will be able to immediately expense up to $2.64 million in qualifying property under Section 179, compared with $2.56 million in 2026. The separate Section 179 deduction limit for sport utility vehicles will increase to $33,100 from $32,000.
The maximum employer-provided childcare tax credit will rise to $515,943.67, up from $500,000 in 2026. For eligible small businesses, the maximum credit will increase to $619,132.40.
Estate, Gift and Foreign Income Exclusions Increase
The federal estate tax basic exclusion will increase to $15.48 million for individuals who die in 2027, up from $15 million in 2026.
The annual gift tax exclusion will rise to $20,000 per recipient, compared with $19,000 in 2026. The exclusion for gifts to a spouse who is not a U.S. citizen will increase to $201,000 from $194,000.
For eligible taxpayers working abroad, the foreign earned income exclusion will increase to $137,300, up from $132,900.
The alternative minimum tax exemption will rise to $93,000 for unmarried individuals, with the phaseout beginning at $515,950. For married couples filing jointly, the exemption will increase to $144,700, with the phaseout beginning at $1,031,900.
Some Tax Provisions Remain Unchanged
Personal exemptions will remain at zero in 2027. The IRS said their elimination under the Tax Cuts and Jobs Act of 2017 was made permanent by the Working Families Tax Cuts. The change does not affect the separate deduction for seniors established under the newer legislation.
The income thresholds for the Lifetime Learning Credit will also remain unchanged. The credit phases out for taxpayers with modified adjusted gross income between $80,000 and $90,000, or between $160,000 and $180,000 for married couples filing jointly.
The IRS also said the general limitation on itemized deductions remains eliminated. However, taxpayers in the 37% tax bracket will face a separate limitation on the tax benefits they can receive from those deductions.