IRS Releases 2026 Inflation Adjustments: Key Changes for CPAs and Business Owners

Adam Tahir
Oct 9
2 min read

The IRS today released Revenue Procedure 2025-32, announcing the official inflation adjustments for tax year 2026, the numbers taxpayers will use when filing their 2026 returns in 2027. This annual update carries special significance in 2025 because it integrates changes enacted under the One, Big, Beautiful Bill (OBBBA), reshaping key thresholds for income taxes, deductions, and credits.

For CPAs, tax attorneys, and business owners, these new figures directly impact withholding, estimated tax planning, and entity-level projections heading into the next fiscal year.

What Changed in the 2026 Inflation Adjustments

1. Higher Standard Deduction

Single / Married Filing Separately: $16,100
Married Filing Jointly / Surviving Spouse: $32,200
Head of Household: $24,150

These increases reflect a roughly 3.8% rise from 2025 levels, helping offset inflation for most taxpayers.

2. Revised Income Tax Brackets

The IRS adjusted marginal tax brackets upward, meaning more income will fall into lower brackets next year. This prevents "bracket creep," when inflation pushes taxpayers into higher tax rates without real income gains.

Example:

The top 37% bracket now starts at $628,350 (single) and $752,800 (joint).

3. AMT Exemption and Phase-Out

Exemption amount: $91,200 (single) / $118,800 (joint)
Phase-out begins: $608,000 (single) / $1,220,000 (joint)

Taxpayers subject to the Alternative Minimum Tax (AMT) should adjust their year-end planning accordingly.

4. Estate and Gift Tax Exclusion

The estate tax exclusion rises to $14.52 million per individual, up from $14.09 million in 2025.This adjustment offers estate planners and high-net-worth clients additional flexibility for wealth transfer and gifting strategies before the scheduled sunset of higher exemptions in 2026 under TCJA provisions.

5. Other Key Adjustments

Adoption Credit: $16,200 per child (up from $15,960)
Earned Income Credit (EIC): Maximum of $7,560 for taxpayers with three or more qualifying children
Foreign Earned Income Exclusion: $130,800

Why It Matters

For practitioners and small-business owners, these inflation adjustments are more than routine.

They form the foundation for:

Quarterly withholding calibrations
2026 compensation and benefit planning
Projected tax liability modeling
Entity structure reviews ahead of TCJA sunsets

CPAs and financial advisors should proactively update client tax projections to incorporate the 2026 thresholds, especially for clients near bracket thresholds or estate exclusion limits.

What’s Next

IRS guidance on 2026 contribution limits (401(k), IRA, HSA) is expected by late November 2025.
State tax conformity updates will follow as legislatures align with federal inflation metrics.
Tax professionals should monitor upcoming IRS procedural notices clarifying how OBBBA modifications interact with traditional bracket indexing.

Bottom Line

The 2026 inflation adjustments will ripple across tax planning, payroll systems, and compliance strategies. For firms advising high-income clients or managing entity structures, now is the time to recalibrate.

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