IRS raises 2027 tax deductions and credits by $1,000

The Internal Revenue Service announced on Thursday that federal tax deductions and credits will rise for the 2027 tax year. The agency adjusted nearly 70 provisions of the tax code to account for inflation. These changes are designed to prevent wage growth from pushing taxpayers into higher brackets.

For married couples filing jointly, the standard deduction will increase by $1,000 to $33,200. Single filers will see a $500 increase, bringing their deduction to $16,600. Heads of households will receive a $775 increase, resulting in a deduction of $24,925. Married individuals filing separately will also see their deduction rise to $16,600.

Families with children will benefit from a higher child tax credit. The maximum credit will rise by $100 to $2,300 per qualifying child. The refundable portion of this credit will also increase by $100 to $1,800. The Earned Income Tax Credit is also expanding. For workers with three or more qualifying children, the maximum credit will increase from $8,231 to $8,496.

Taxpayers who itemize deductions may find less value in their records as the standard deduction rises. A married couple with $100,000 in adjusted gross income would have $66,800 in taxable income under the new rules, assuming no other adjustments. A single taxpayer with the same income would have $83,400 in taxable income.

The IRS shifted income thresholds upward across all seven federal tax brackets. The rates remain 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent. For single filers, the 10 percent bracket now applies to income up to $12,800, up from the previous limit. The top 37 percent bracket begins at $661,376 for single filers.

Other specific tax provisions are also changing. The maximum adoption tax credit will rise to $18,250, with up to $5,280 refundable. The annual gift tax exclusion per recipient will increase from $19,000 to $20,000. The federal estate tax exclusion will jump from $15 million to $15.48 million. The foreign earned income exclusion for Americans working abroad will increase to $137,300.

Workers with flexible spending accounts can contribute more pretax money for health expenses. The annual limit will rise to $3,500, up from $3,400. The maximum carryover for unused funds will increase to $700. The monthly limit for employer-provided transportation and parking benefits will rise to $350.

The new amounts will be reflected on federal income tax returns filed in 2028. Taxpayers filing for the 2026 tax year early next year will still use the previous figures. The IRS published these details in Revenue Procedure 2026-35.