IRS Releases 2026 Inflation Adjustments Under OBBBA
- MyTAXPrepOffice Editorial Group
- Oct 10
- 3 min read
The IRS has released the annual inflation adjustments for tax year 2026—adjustments that include not just routine cost-of-living increases, but also several provisions shaped by the new One Big Beautiful Bill Act (OBBBA). For tax professionals, these updates present both a planning opportunity and a need to revise client projections and strategies.
Key Inflation Adjustments & OBBBA-Driven Changes
Permanent Tax Brackets & Adjusted Thresholds: The OBBBA made permanent the seven federal tax rates (10%, 12%, 22%, 24%, 32%, 35%, 37%). What changes annually now are the income thresholds for those brackets. The inflation adjustments ensure taxpayers aren’t pushed into higher brackets simply due to inflation. The IRS’s official announcement notes that more than 60 tax provisions are being adjusted for inflation, in line with both long-standing law and the new legislative changes.
Higher Standard Deduction & Expanded Deductions for Seniors: Under OBBBA, the standard deduction has been increased and in many cases made more permanent. For tax year 2026, the deduction amounts will rise to reflect inflation. In addition, for taxpayers aged 65 or older, OBBBA introduces a new bonus deduction (e.g. $6,000) that phases out for higher-income filers.
Estate & Gift Tax Exclusion Increases: One of the more dramatic moves: the estate tax exclusion is set to increase to $15 million per person in 2026. This is above the inflation adjustment and is directly influenced by the new law.
Health & Retirement Plan Adjustments: Alongside the standard inflation updates, the IRS has already published adjustments for HSAs (Health Savings Accounts) and certain HRAs for 2026. For example:
The HSA contribution limit for self-only coverage is rising to $4,400 (from $4,300)
The family coverage limit moves to $8,750 (from $8,550)
The qualifying high-deductible plan (HDHP) thresholds and out-of-pocket limits are also rising.
What This Means for Your Clients
Review and update projections: Clients whose incomes are near the bracket thresholds should have their projections refreshed. A small shift in threshold may affect their bracket, marginal rates, or eligibility for certain phaseouts.
Maximize deductions for older clients: For clients age 65+, the new bonus deduction under OBBBA could offer significant tax relief—especially for those whose income falls under the phaseout thresholds.
Leverage estate & gift planning opportunities: The jump in estate tax exclusion is an opportunity to revisit clients with large estates or gifting plans. Strategies that were marginal before may now be more beneficial.
Adjust retirement and health plan advice: With HSA and other benefit thresholds increasing, clients should revisit contributions, plan design, and funding. For those close to limits, even modest increases matter.
Communicate changes proactively: Many clients don’t follow legislative or inflation updates. Positioning yourself as the expert who stays ahead of these shifts builds trust. Send a summary, host a webinar, or publish a client memo.
Things to Watch (or Watch Out For)
Phaseouts and limitations — Some of these new benefits (like the senior deduction) come with phaseouts for higher-income taxpayers. Be careful when advising clients near those thresholds.
Non-indexed provisions — Some new deductions or credits may not be inflation-indexed, meaning over time their relative value can erode.
IRS guidance — The IRS may issue clarifications, transitional rules, or guidance on implementation, especially for OBBBA provisions. Stay alert.
Interplay with other rules — Always consider how these adjustments interact with other tax rules (AMT, phaseouts, credits, etc.). A change in one area can ripple elsewhere.
Final Thoughts
The 2026 inflation adjustments reflect both the regular protection against “bracket creep” and the more sweeping changes introduced by OBBBA. For tax professionals, the task is clear: update your models, review client positions, and communicate proactively.
Disclaimer: This article is for informational and educational purposes only and does not constitute legal tax advice. Advanced Tax Solutions is not liable or responsible for any damages resulting from or related to your use of this information. It is your responsibility to refer to official IRS documentation for information regarding any tax laws or tax information shown here.
