You client's tax brackets just changed – here's what the IRS just announced

The Internal Revenue Service (IRS) has released its 2026 inflation adjustments, updating more than 60 tax provisions that will affect everything from income tax brackets to estate and adoption credits. The new figures — detailed in Revenue Procedure 2025-32 — also incorporate key changes from the recently enacted One, Big, Beautiful Bill (OBBB), a sweeping tax reform package aimed at simplifying and expanding certain taxpayer benefits.

For registered investment advisers (RIAs) and their clients, the 2026 tax year marks a significant recalibration of deductions and thresholds — and a planning opportunity to reassess withholding, charitable giving, and estate strategies before year-end.

Key Highlights for 2026

Standard deduction increases again

The standard deduction rises to $32,200 for married couples filing jointly, $16,100 for single filers and married individuals filing separately, and $24,150 for heads of households.
That’s up slightly from the OBBB-enhanced 2025 levels ($31,500 joint / $15,750 single / $23,625 head of household), reflecting the IRS’s annual inflation adjustment.

Marginal tax brackets hold steady at the top

The top marginal rate remains 37 percent, applying to income above:

• $640,600 for single filers
• $768,700 for married couples filing jointly

Other brackets increase slightly to account for inflation:

• 35 percent above $256,225 ($512,450 joint)
• 32 percent above $201,775 ($403,550 joint)
• 24 percent above $105,700 ($211,400 joint)
• 22 percent above $50,400 ($100,800 joint)
• 12 percent above $12,400 ($24,800 joint)

Major Credits and Exemptions

Alternative Minimum Tax (AMT)

The AMT exemption climbs to $90,100 for single filers and $140,200 for joint filers, with phaseouts beginning at $500,000 and $1,000,000, respectively.

Estate and gift tax

The federal estate tax exclusion rises to a record $15 million, up from $13.99 million in 2025. The annual gift exclusion remains at $19,000, though gifts to non-citizen spouses may reach $194,000 in 2026.

For wealthy clients, RIAs may want to revisit estate freeze strategies, grantor trusts, and lifetime gifting while the historically high exclusion remains in place.

Adoption credit

The maximum adoption credit grows to $17,670 in 2026, with up to $5,120 potentially refundable — a nod to family-friendly provisions embedded in the OBBB.

Employer-provided childcare credit

A standout OBBB feature, the employer-provided childcare credit now allows businesses to claim up to $500,000 — or $600,000 for qualifying small businesses — up from $150,000 previously.

Everyday Taxpayer Adjustments

• Earned Income Tax Credit (EITC): Maximum benefit increases to $8,231 for families with three or more children.
• Commuter and Parking Benefits: Monthly cap rises to $340.
• Health FSA Limit: Employees can now contribute up to $3,400, with a $680 carryover.
• Medical Savings Accounts: Higher deductible and out-of-pocket limits apply for both self-only and family coverage.
• Foreign Earned Income Exclusion: Climbs to $132,900, up from $130,000 in 2025.

Unchanged or permanent provisions

Some provisions remain locked in under the OBBB:

• Personal Exemption: Permanently eliminated.
• Itemized Deduction Limit: Still removed, though capped for taxpayers in the 37 percent bracket.
• Lifetime Learning Credit: Phase-out thresholds remain unadjusted — $80,000 to $90,000 for single filers and $160,000 to $180,000 for joint returns.

RIA takeaway: Strategic planning ahead of 2026

For financial advisers and wealth managers, these IRS adjustments and OBBB reforms highlight a clear message: tax planning is now more fluid than ever. The expanded standard deduction, enhanced childcare credits, and larger estate tax thresholds could reshape cash flow and legacy planning conversations heading into 2026.

Advisers should:

• Reassess withholding and estimated payments for clients mid-income bracket.
• Explore charitable bunching strategies under higher deduction limits.
• Review estate plans to leverage the $15 million exclusion before any future sunset.
• Help small-business clients utilize the expanded childcare tax credit as both a retention and tax-saving tool.

Bottom line

The IRS’s 2026 inflation adjustments — amplified by the One, Big, Beautiful Bill — deliver a mix of modest relief and major planning opportunities. RIAs should act early to align client tax strategies with the new thresholds before they take effect on returns filed in 2027.