IRS Releases 2027 Tax Inflation Adjustments: What Taxpayers Need to Know

IRS Releases 2027 Tax Inflation Adjustments: What Taxpayers Need to Know

The IRS has announced its annual inflation adjustments for tax year 2027, increasing many tax thresholds, deductions, and credits to help taxpayers keep pace with inflation. These changes will apply to returns filed in 2028.

Key Updates for 2027

Higher Standard Deductions

Most taxpayers take the standard deduction, which will increase to:

  • Married Filing Jointly: $33,200 (up $1,000)
  • Single & Married Filing Separately: $16,600 (up $500)
  • Head of Household: $24,925 (up $775)

Tax Brackets Increase

While tax rates remain the same, income thresholds for each bracket are increasing. This allows taxpayers to earn more before moving into a higher tax bracket.

Child Tax Credit Increases

The maximum Child Tax Credit rises to $2,300 per qualifying child, with the refundable portion increasing to $1,800.

Business Investment Incentives

Businesses can expense up to $2.64 million of qualifying property under Section 179, an increase from 2026. This can provide valuable tax savings for companies investing in equipment and other eligible assets.

Estate and Gift Tax Updates

  • The federal estate tax exclusion increases to $15.48 million per individual.
  • The annual gift tax exclusion rises to $20,000 per recipient.

Other Notable Changes

Additional inflation adjustments include:

  • Higher Earned Income Tax Credit limits
  • Increased Health FSA contribution limits
  • Higher foreign earned income exclusion amounts
  • Increased adoption tax credits
  • Adjusted Alternative Minimum Tax exemption amounts

What This Means for Taxpayers

These annual adjustments are designed to reduce the effects of inflation and help prevent taxpayers from being pushed into higher tax brackets solely due to rising wages. While many of the changes may seem incremental, they can create meaningful tax savings opportunities for individuals, families, and businesses.

How HTB Can Help

Tax law continues to evolve, and even routine inflation adjustments can affect planning strategies. Whether you’re reviewing your personal tax situation, evaluating business investments, or considering estate planning opportunities, HTB’s tax professionals can help you understand how these changes may impact your goals and identify opportunities to maximize tax savings. Contact us to start the conversation today.

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