Savvy Americans are aware of the impact that taxes have on their wealth. Since July, we have known that the reduced federal income tax brackets were extended indefinitely with the passage of the One Big Beautiful Bill Act. What we did not know was the income ranges those tax brackets would cover. Thanks to data recently released by the IRS we now have that information.
Tax Brackets See Income Increases
All tax brackets will see an overall increase of 2.7% in additional income before reaching the next higher tax bracket. But the new tax law skews more benefits towards lower wage earners.
For the 2026 tax year, taxable income levels subject to the 10% and 12% tax brackets increased 4% for each bracket from 2025 levels.
Higher income taxpayers did not fare quite as well as taxable income levels in the higher tax brackets (22%, 24%, 32%, 35% and 37%) increased only 2.3% from 2025 levels.
Increased Standard Deduction
Taxpayers also get an additional break with a significant increase in the standard deduction amount. For 2026 the standard deduction is $16,100 for individual filers, up from $15,750 in 2025. For married couples filing jointly the new standard deduction is $32,200, up from $31,500 in 2025.
Other Tax Changes
In addition to the changes to income tax brackets and standard deductions, taxpayers will receive additional benefits in 2026. The income thresholds for capital gains tax rates also increased. Single filers with taxable income up to $49,450 and married filing jointly with income up to $98,900 can sell appreciated assets and pay a 0% capital gains tax rate.
The estate tax exclusion threshold increases to $15 million in 2026, up from $13.99 million. The annual limit on gifts of $19,000 remains the same as in 2025.
Tax optimization is an important focus of your financial plan. We now know the complete landscape for tax years 2025 and 2026. With more than two months left in 2025, it is the perfect time to shore up your tax strategy by calling our office today to schedule time to meet.
Sources: IRS.gov, The Wall Street Journal