IRS ANNOUNCES NEW FEDERAL INCOME TAX BRACKETS FOR 2026... HERE'S WHY YOU MAY NEVER SEE RELIEF

The IRS is adjusting income limits for federal tax brackets to account for inflation — but the relief could be short-lived or even vanish entirely. 

Further rising prices for everyday goods threaten to eat away at the small gains for lower- and middle-income earners.  

Meanwhile, higher earners stand to see little benefit from the changes at all. 

In an update released Thursday, the Internal Revenue Service raised income thresholds across all tax brackets, meaning workers will need to earn slightly more before being pushed into higher tax rates.

The IRS usually updates these brackets in October or November to prevent 'bracket creep,' when inflation pushes taxpayers into higher rates and forces them to pay more in April. 

The top federal rate of 37 percent will now apply to individuals making more than $640,600 and married couples earning over $768,700 in 2026. That's roughly a 2.5 percent jump from the current thresholds.

The agency also boosted the standard deduction, the amount Americans can automatically subtract from their taxable income.

Married couples filing jointly can now deduct $32,200, up from $31,500 this year, while single filers get $16,100, compared with $15,750— both increases of 2.2 percent. Heads of household will get $24,150 instead of $23,850, up 1.3 percent.

Seniors could see additional relief thanks to a provision in the One Big Beautiful Bill Act, which provides a temporary tax deduction of up to $6,000 for people aged 65 and older. 

While the changes may sound modest, and some of the gains could be eaten up by rising prices, they still matter for millions of working households 

It means many Americans will keep slightly more of their paycheck, and fewer will find themselves pushed into a higher bracket simply because their wages rose with inflation.

But for those at the top of the income scale, the benefit will be negligible.

The highest earners will still face steep rates, and the top bracket's expansion only delays, rather than prevents, bigger tax bills if incomes rise sharply.

While the IRS is raising thresholds to keep more money in taxpayers' pockets, the benefits could be quickly eaten up by rising inflation, ongoing price pressures, and potential future policy changes. 

On top of that, nearly half of IRS staff are set to be furloughed due to the government shutdown, which could delay refunds and reduce taxpayer support.

The IRS also adjusted long-term capital gains limits, the estate and gift tax exemption, and eligibility for the earned income tax credit — all pegged to inflation.

The announcement came just one day after the agency said it would furlough nearly half its workforce amid the ongoing government shutdown, a move expected to delay refunds and slow taxpayer assistance.

Around 40,000 employees will remain working, but the majority of operations are closed.

Taxpayers with an Oct. 15 extension deadline are advised to submit their returns as planned, the agency said. 

Meanwhile, it emerged on Monday that Treasury Secretary Scott Bessent will remain IRS commissioner, with a new top deputy to be named.

Bessent took over in August after President Trump removed Billy Long just two months after his confirmation — a move that raised questions about politicization of the tax agency. Long has since been nominated as US ambassador to Iceland.

Sources say Trump decided Bessent should continue leading the IRS. He is expected to announce Frank Bisignano, current Social Security commissioner, as the agency’s new CEO, a newly created role.

Read more

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• Will crippling IRS job cuts plunge tax season into chaos and leave millions in refund limbo?
• How is the IRS grappling with the massive workforce furlough amid the relentless government shutdown?

2025-10-09T15:28:16Z