IRS releases tax inflation adjustments for tax year 2027

The tax year 2027 adjustments described below generally apply to tax returns filed in 2028. The tax items for tax year 2027 of greatest interest to most taxpayers include the following dollar amounts.

Items affected by indexing

Standard deduction

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, and for heads of households, the standard deduction will be $24,925.

Marginal rates

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 incomes of single individuals with incomes of $12,800 or less ($25,600 for married couples filing jointly).

Child tax credit

The maximum child tax credit (CTC) for 2027 is $2,300, up $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 amounts

The alternative minimum tax (AMT) exemption amount for unmarried individuals is $93,000 and begins to phase out at $515,950 ($144,700 for married couples filing jointly for whom the exemption 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

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.

Section 179 property

Taxpayers can expense up to $2,640,000 of §179 property, up from $2,560,000 for tax year 2026. The limit for sport utility vehicles (SUVs) 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 child care tax credit

The maximum amount of the employer-provided child care tax credit rises to $515,943.67, up from $500,000 for 2026 ($619,132.40 if the employer is an eligible small business).

Earned income tax credits

The maximum earned income tax credit (EITC) is $8,496 for qualifying taxpayers with three or more qualifying children, up from $8,231 for tax year 2026. Rev. Proc. 2026-35 provides the maximum EITC amounts for other categories, along with income thresholds and phaseout amounts.

Qualified transportation fringe benefit

The monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking increase to $350, up $10 from 2026.

Health flexible spending cafeteria plans

The dollar limitation for voluntary employee salary reductions for contributions to health flexible spending accounts (FSAs) increases to $3,500, up $100 from the prior year. For cafeteria plans that permit carryover of unused amounts, the maximum carryover is $700, up $20 from tax years beginning in 2026.

Medical savings accounts

For participants who have self-only coverage in a medical savings account (MSA), the plan must have an annual deductible that is not less than $3,000, up $100 from tax year 2026 – but not more than $4,550, an increase of $150 from tax year 2026. For self-only coverage, the maximum out-of-pocket expense is $6,050, up $200 from 2026. For tax year 2027, for family coverage, the annual deductible is not less than $6,050, up from $5,850 for 2026; however, the deductible cannot exceed $9,050, up $300 from the limit for tax year 2026. For family coverage, the out-of-pocket expense limit is $11,050 for tax year 2027, up $250 from tax year 2026.

Foreign earned income exclusion

The foreign earned income exclusion (FEIE) is $137,300, up from $132,900 for tax year 2026.

Items unaffected by indexing

By statute, certain items that were indexed for inflation in the past are currently not adjusted.

Personal exemptions

Personal exemptions remain at $0, as in tax year 2026. The Tax Cuts and Jobs Act of 2017 (TCJA) eliminated the personal exemption, and the One Big Beautiful Bill Act (OBBBA) made it permanent. (The personal exemption described here doesn't include the senior deduction added by OBBBA.)

Itemized deductions

The limitation on itemized deductions was previously eliminated for tax years 2018-2025. OBBBA made the elimination of the limitation permanent, although it imposes a limitation on the tax benefit from itemized deductions for taxpayers in the highest tax bracket (37%).

Lifetime learning credits

The modified adjusted gross income (MAGI) amount used to phase out the lifetime learning credit (LLC) has not been adjusted for inflation for tax years beginning after Dec. 31, 2020. The LLC is phased out for taxpayers with MAGI between $80,000 and $90,000 ($160,000 and $180,000 for joint returns).