It's official. The Internal Revenue Service (IRS) has released its updated tax brackets for 2026, reflecting recent inflation as well as measures put in place by President Trump's "One Big Beautiful Bill Act," meant to offer some stimulative relief to most American households.
So what changed? Not a lot other than the numbers. But it's the numbers, of course, that most taxpayers are concerned about knowing. Here's what you need to know about the new tax brackets, plus a couple of other important details.
What's no longer taxed
Most of your income will remain taxable as it has been in the past. Many workers, however, may see a measurable reduction in the amount of their income that's passed along to the IRS.
Namely, anyone employed in an industry like the restaurant business where cash tips are part of the normal course of business won't owe any federal income tax on the first $25,000 of this income, by virtue of a deduction on Form 1040. For affected workers with adjusted gross income of $150,000 or more per year -- or $300,000 for married joint filers -- however, this deduction is progressively phased out.
Just bear in mind that this tax break only applies to income tax. You'll still owe FICA taxes on these tips, and you may still owe state income tax as well.
Some hourly employees will also start enjoying slightly bigger net incomes. That's because the first $12,500 -- or $25,000 for joint filers -- of their overtime pay (the amount of time worked in excess of 40 hours per week) won't be subject to additional income taxation, again by virtue of a tax deduction when filing. As was the case with the aforementioned tip income, this income deduction is available in addition to any itemized deductions or standard deductions.
In both cases, these new rules are currently only in effect for tax years 2025 through 2028. If they become permanent, it will require future legislative action.
Bigger deductions
The One Big Beautiful Bill Act not only details next year's standard deductions, but retroactively raises the standard deduction for this tax year as well. For tax year 2025, individual filers can deduct $15,750 from their otherwise-taxable income rather than itemizing their deductions, while joint filers can automatically reduce their net taxable income by $31,500. Next year, these numbers will be upped $16,100 and $32,200, respectively. For heads of households, tax year 2025's standard deduction is $23,625, and will be raised to $24,150 for 2026.
For perspective, 2024's standard deduction for single filers was $14,600, while married/joint filers could automatically deduct up to $29,200 from their modified adjusted gross income, or MAGI.
Image source: Getty Images.
The federal income tax deduction for paid state and local taxes -- commonly called the SALT deduction -- has been upped as well, from its previous ceiling of $10,000 to $40,000 for joint filers in tax year 2025, and will be raised by 1% every year through 2029; individual filers or married couples who file separately can each deduct up to half of this cap.
However, this deduction begins shrinking for households earning in excess of $500,000 and $505,000 (or half these amounts for single filers) per year in 2025 and 2026, respectively, and can be phased down to as little as $10,000 per household.
Also, anyone over the age of 65 is now allowed to take an additional $6,000 deduction from their adjusted gross income -- or $12,000 for married couples -- thus lowering their effective tax liability. This deduction begins phasing down once reported gross income individual reaches $75,000, or $150,000 for joint filers, though, and as it stands right now is slated to expire after 2028.
New tax brackets
As for the percentage of your income (after deductions) subject to income taxation by the IRS, the calculation remains progressively tiered. That is to say, the more you make, the greater the proportion of your income that's taxed. The tax rate percentages for each of these tiers is remaining the same too, at 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
What's changing for tax year 2026 is the amount of income that's subject to taxation at those rates. These three tables lay out the differences between this year and next year for each of the three possible scenarios that will apply when the time comes to file taxes.
Single filers
| Rate | 2025 AGI Taxable at This Rate | 2026 AGI Taxable at This Rate |
|---|---|---|
| 10% | $0 to $11,925 | $0 to $12,400 |
| 12% | $11,926 to $48,475 | $12,401 to $50,400 |
| 22% | $48,476 to $103,350 | $50,401 to $105,700 |
| 24% | $103,351 to $197,300 | $105,701 to $201,775 |
| 32% | $197,301 to $250,525 | $201,776 to $$256,225 |
| 35% | $250,526 to $626,350 | $256,226 to $640,600 |
| 37% | $626,351 and up | $640,601 and up |
Data source: IRS.gov, Tax Foundation
Married/joint filers
| Rate | 2025 AGI Taxable at This Rate | 2026 AGI Taxable at This Rate |
|---|---|---|
| 10% | $0 to $23,850 | $0 to $24,800 |
| 12% | $23,850 to $95,950 | $24,801 to $100,800 |
| 22% | $95,951 to $206,700 | $100,801 to $211,400 |
| 24% | $206,701 to $394,600 | $211,401 to $403,550 |
| 32% | $394,601 to $501,050 | $403,551 to $512,450 |
| 35% | $501,051 to $751,600 | $512,450 to $768,700 |
| 37% | $751,601 and up | $768,701 and up |
Heads of household
| Rate | 2025 AGI Taxable at This Rate | 2026 AGI Taxable at This Rate |
|---|---|---|
| 10% | $0 to $17,000 | $0 to $17,700 |
| 12% | $17,001 to $64,850 | $17,701 to $67,450 |
| 22% | $64,851 to $103,350 | $67,451 to $105,700 |
| 24% | $103,351 to $197,300 | $105,701 to $201,775 |
| 32% | $197,301 to $250,500 | $201,776 to $256,200 |
| 35% | $250,501 to $626,350 | $256,201 to $640,600 |
| 37% | $626,351 and up | $640,601 and up |
Data source: IRS.gov, Tax Foundation
Other considerations
The Earned Income Tax Credit (EITC) will be capped at $8,046 for tax year 2025, by the way, for households with three or more children. That ceiling will be upped to $8,231 next year. The numbers are of course lower with fewer dependent children.
And if it applies to you, this year's alternative minimum tax (AMT) rate is 26% for individual filers earning $119,550 or less, and a maximum of 28% for people with adjusted gross incomes above that mark. For married people and joint filers, the 2025 threshold is $239,100. Exemptions, however, are in place for amounts up to $88,100 and $137,000, respectively.
Next year's AMT tax rates are still 26% and 28%, but the upper rate only applies to individual income above $122,500, or above joint filers' total taxable income of more than $244,500. The exemption levels are also raised to $90,100 for individuals, and $140,200 for married joint filers.
As always, these AMT exemptions are phased out for especially high earners.
Capital gains taxation
These aren't the only changes slated for the coming year, either. Long-term capital gains taxation levels for 2026 changed from 2025's as well, although they remain tethered to taxable wages at familiar rates.
For 2026, single filers with taxable income of less than $49,450 (versus $48,350 this year) will owe nothing in capital gains taxes, while a capital gains tax rate of 15% applies to gains that push overall adjusted income up to between $49,451 and $545,500 (or $48,351 to $533,400 for 2025). Taxable income in excess of those upper limits will mean long-term capital gain tax rates of 20% for long-term investment income's part in that total reported income.
For married or joint filers, combined reported income of less than $98,900 this year (up from $96,700 this year) will sidestep all capital gains taxation, while adjusted gross income of between $98,901 to $613,700 for 2026 (versus 2025's range of $96,701 to $600,050) will result in a 15% tax of long-term gains on the portion of those gains that isn't work-based income. Any long-term investment income that drives joint filers' total taxable income above the upper thresholds of these ranges will be taxed at a rate of 20%.
No more tax breaks for electric vehicle purchases
Finally, tax credits for buying electric vehicles no longer exist for any EV purchases made after Sept. 30 of this year.
