IRS raises 2027 federal tax brackets and standard deduction
U.S. taxpayers are getting wider federal income thresholds for 2027 as the Internal Revenue Service adjusts key tax provisions for inflation. The changes apply to tax year 2027 returns filed in 2028 and also extend to capital gains thresholds, the estate and gift tax exemption, and earned income tax credit eligibility.
Highlights
- IRS raised 2027 federal tax bracket thresholds, with the 37% rate applying to individuals earning above $661,375 and couples above $793,650.
- The 2027 standard deduction increased to $33,200 for married couples filing jointly and $16,600 for single filers, up from 2026 levels.
- Inflation-driven adjustments also boosted long-term capital gains brackets, the estate and gift tax exemption, and earned income tax credit eligibility.
2027 income thresholds and deduction changes
As reported by CNBC, citing the IRS, the agency lifted the income thresholds for each federal tax bracket for 2027 and increased the standard deduction for both joint and single filers.For 2027, the top tax rate of 37% applies to individuals with taxable income above $661,375 and to married couples filing jointly with income of $793,650 or more. The standard deduction rises to $33,200 for married couples filing jointly from $32,200 in 2026, while single filers can claim $16,600, up from $16,100.
The agency also increased figures for other tax provisions, including long-term capital gains brackets, the estate and gift tax exemption, and eligibility for the earned income tax credit.
Inflation backdrop shapes taxpayer relief
The higher thresholds arrive as households continue to face affordability pressure from housing, groceries, gasoline, and other living costs. By adjusting brackets and deductions upward, the annual inflation update can help limit bracket creep, where taxpayers move into higher tax bands because of nominal income gains rather than stronger purchasing power.The consumer price index climbed 3.7% in September 2026 from a year earlier, after a 3.4% annual pace in August, according to data the Bureau of Labor Statistics reported in October. That inflation backdrop helps explain why the 2027 federal tax adjustments are larger across several major provisions.
Our earlier report on UBS Global Wealth Management’s Fed outlook explained why persistent inflation led the bank to expect a longer tightening cycle, with additional rate hikes projected into March 2027. It also noted that market pricing shifted after a stronger inflation print, reinforcing expectations for higher-for-longer borrowing costs and tighter financial conditions.
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