The IRS did not respond to a request for comment on the inflation rate it applied in adjusting its tax brackets for 2026. Bloomberg Tax forecasted last month that the agency would apply an inflation rate of 2.7%.
The IRS uses the data from the past 12 months to make adjustments for the 2026 tax year, as required by the 2017 Tax Cuts and Jobs Act.
The IRS announced Wednesday that an agency-wide furlough would begin on Oct. 8 due to a lapse in federal appropriations as a result of the government shutdown. Taxpayers with an Oct. 15 extension deadline should plan on submitting their returns as planned, according to the agency.
"Taxpayers should continue to file, deposit, and pay federal income taxes as they normally would; the lapse in appropriations does not change Federal Income Tax responsibilities," a spokesperson told CBS News in an email.
Standard Deduction
In addition to setting the federal income tax brackets, the IRS also released changes to 2026 standard deductions on Thursday.
Married couples filing jointly will have a standard deduction of $32,200
Heads of households will have a standard deduction of $24,150
Single taxpayers and married individuals will face a standard deduction of $16,100
Seniors could see additional relief due to a provision in the One Big Beautiful Bill Act that provides a temporary tax deduction of up to $6,000 for people aged 65 and older. The tax break, which is set to expire at the end of 2028, is available to those with an adjusted gross income of $75,000 or less for single filers and $150,000 or less for couples filing jointly.
Earned Income Tax Credit
The maximum amount for households that claim the Earned Income Tax Credit will be $8,231 for families with at least three children, up from $8,046 for the current tax year, the IRS said.
Estate tax limit
The estates of wealthy Americans will see a bigger tax break in 2026 than they did this year. The IRS said Thursday that the estates of people who die in 2026 will have a basic exclusion amount of $15 million, up from nearly $14 million in the 2025 tax year.
Health Flexible Spending
U.S. workers can now voluntarily contribute up to $3,400 to their health flexible spending accounts, up $100 from prior year. These contributions, which are deducted pre-tax from employee paychecks, go toward an account that can be used to pay for out-of-pocket medical expenses.
Understanding your tax bracket
There's a misconception that Americans pay the top tax rate on every dollar of their income, but that isn't the case. Taxation in the U.S. is progressive, meaning that tax rates increase the more you earn. In other words, the seven income tax rate brackets — 10%, 12%, 22%, 24%, 32%, 35% and 37% — represent the percentage you'll pay on portions of your income.
For instance, a single taxpayer making $50,000 in taxable income in 2026, will pay 10% in federal taxes on the first $12,400 of their income (the top threshold for the 10% bracket) and then 12% on the remaining $37,600.
To determine your marginal tax bracket, you must first figure out what your highest taxable income is. Take the example of a married couple with $150,000 in gross income. They would first subtract the 2026 standard deduction of $32,200 from that amount, leaving them with $117,800 in taxable income. That would put their top marginal tax rate at 22%.
However, their effective tax rate — meaning the percentage of their annual income that they will pay to the IRS —is much lower, as follows:
Their first $24,800 of income will be taxed at 10%, or $2,480 in taxes
Their earnings from $24,800 to $100,800 would be taxed at 12%, or $9,120 in taxes
Their income from $100,800 to $117,800 would be taxed at 22%, or $3,740 in taxes
Combined, they would pay $15,340 in federal income taxes, giving them an effective tax rate of 13%.
How the OBBBA will impact taxes
The One Big Beautiful Bill Act, signed into law by President Trump in July, made most of the tax cuts from the 2017 Tax Cuts and Jobs Act permanent, helping some American taxpayers avert a scheduled tax increase.
As a result of the Republican spending bill, the typical filer could see an average tax cut of $3,752 in 2026, with benefits varying depending on the filer's geographic location, according to an in August from the Tax Foundation.
A taxpayer's income will also influence the tax cuts they see, with higher-income Americans more likely to see a bigger benefit from tax provisions in the legislation than lower-income households.
A July from the Tax Policy Center found that the typical household in the bottom quintile — those earning up to $34,600 per year — will save an average of about $150 in tax payments in 2026, or 0.8% of their income. By comparison, those in the top quintile — those who earn $217,101 or more — will save an average of $12,540 next year, or 2.5% of their income.
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