Tax inflation adjustments for tax year 2027

It's that time of year again!  The Internal Revenue Service has just released the updated adjustment figures for next year.  Here are the highlights for you:

The tax year 2027 adjustments described below generally apply to tax returns filed in 2028. Highlights include:

• Standard Deduction: For tax year 2027, the standard deduction increases to $33,200 for married couples filing jointly, up $1,000 from 2026. For single taxpayers and married individuals filing separately, the standard deduction rises to $16,600 for tax year 2027. For heads of household, it rises to $24,925.
• Marginal Rates: For tax year 2027, the top tax rate remains 37% for individual single taxpayers with incomes greater than $661,375 ($793,650 for married couples filing jointly). The other rates are:
  • 35% for incomes over $264,550 ($529,100 for married couples filing jointly);
  • 32% for incomes over $208,325 ($416,650 for married couples filing jointly);
  • 24% for incomes over $109,125 ($218,250 for married couples filing jointly);
  • 22% for incomes over $52,025 ($104,050 for married couples filing jointly);
  • 12% for incomes over $12,800 ($25,600 for married couples filing jointly;.
  • The lowest rate is 10% for single individuals with incomes of $12,800 or less ($25,600 for married couples filing jointly).
• The maximum amount of the child tax credit for 2027 is $2,300, an increase of $100 from 2026. For tax year 2027, the amount of credit that may be refundable is $1,800, also up $100 from 2026.
• Alternative Minimum Tax Exemption Amount: For tax year 2027, the exemption amount for unmarried individuals is $93,000 and begins to phase out at $515,950. For married couples filing jointly, the exemption amount is $144,700 and begins to phase out at $1,031,900.
• Estate Tax Exclusion: Estates of decedents who die during 2027 have a basic exclusion amount of $15,480,000, up from a total of $15,000,000 for estates of decedents who died in 2026.
• Annual Exclusion for Gifts: For calendar year 2027, the annual exclusion for gifts increases to $20,000, up from $19,000 for calendar year 2026. (However, the annual exclusion for gifts to a spouse who is not a citizen of the United States increases to $201,000 for calendar year 2027, up from $194,000 for calendar year 2026.)
• Expensing: For tax year 2027, taxpayers can expense up to $2,640,000 of section 179 property, up from $2,560,000 for tax year 2026. The limit for sport utility vehicles for tax year 2027 is $33,100, up from $32,000 for tax year 2026.
• Adoption Credits: The maximum credit allowed for adoptions for tax year 2027 is the amount of qualified adoption expenses up to $18,250, up from $17,670 for 2026. For tax year 2027, the amount of credit that may be refundable is $5,280.
• Employer-Provided Childcare Tax Credit: The Working Families Tax Cuts significantly enhanced this important credit for employers. For tax year 2027, the maximum amount of employer-provided childcare tax credit rises to $515,943.67, up from $500,000 for 2026 ($619,132.40 if the employer is an eligible small business).