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The Internal Revenue Service (IRS) has announced new federal income tax brackets for 2026, adjusting income limits to account for inflation. Despite the ongoing government shutdown, the IRS released these details on Thursday (October 9). The adjustments aim to prevent "bracket creep," where inflation pushes taxpayers into higher tax rates, forcing them to pay more in taxes.
The top federal tax rate of 37 percent will now apply to individuals earning over $640,600 and married couples making more than $768,700. This represents a roughly 2.5 percent increase from current thresholds. The IRS also increased the standard deduction, allowing married couples filing jointly to deduct $32,200, up from $31,500, and single filers to deduct $16,100, compared to $15,750 this year. These changes are designed to help Americans keep more of their earnings, though rising inflation may offset these benefits.
These changes, while modest, are significant for many working households. However, higher earners may see little benefit, as the top bracket's expansion only delays potential tax increases if incomes rise sharply.
The IRS also adjusted limits for long-term capital gains, estate and gift tax exemptions, and the earned income tax credit, all pegged to inflation. Despite these updates, nearly half of the IRS workforce is furloughed due to the government shutdown, which could delay tax refunds and reduce taxpayer support.