IRS Releases 2026 Inflation Adjustments Under OBBBA

The IRS has officially released the annual inflation adjustments for the 2026 tax year—adjustments that reflect not only routine cost-of-living updates but also significant provisions from the One Big Beautiful Bill Act (OBBBA). For tax professionals, these updates present opportunities to advise clients effectively, update planning models, and refine strategies ahead of filing season.

Here’s a breakdown of what’s changing — and what you should be doing for your clients.

Key Inflation Adjustments & OBBBA-Driven Changes

1. Standard Deduction Increases: For tax year 2026, the standard deduction has increased to:

   • $16,100 for single filers or married filing separately

   • $32,200 for married filing jointly or surviving spouses

   • $24,150 for heads of households. These amounts are a combination of inflation indexing and the higher deduction amounts established under OBBBA.

     
     

2. Tax Bracket and Rate Continuity: The top tax rate remains 37% for individual filers with incomes above $640,600 (and $768,700 for married filing jointly) for the 2026 year. Other marginal brackets are adjusted upward slightly to reflect inflation, helping prevent “bracket creep.”

   
   

3. Estate & Gift Tax Updates: The estate tax “basic exclusion amount” for decedents in 2026 is raised to $15 million, up from about $13.99 million in 2025. This change creates meaningful planning space for high-net-worth clients.

   
   

4. Credits & Benefits Adjusted

   • The maximum Earned Income Tax Credit (EITC) for taxpayers with three or more qualifying children increases to $8,231 for 2026.

   • Health FSA, medical savings accounts, and foreign-earned income exclusions also see modest upward adjustments.

     
     

5. What Remains Unchanged: Some items remain fixed despite inflation: personal exemptions remain at $0, and the lifetime learning credit phase-out thresholds haven’t changed.

   
   

What This Means for Your Clients

• Mid-income and near-bracket clients: should have their projections reviewed. Even modest inflation adjustments can influence whether they hit certain phase-outs or deductions.

  
  

• Seniors and those with estates: With the estate tax exclusion increasing and inflation adjustments tightening thresholds elsewhere, your high-net-worth or older clients may need updated modeling.

  
  

• Small business owners and benefit-planning clients: The adjustment of credits and benefits (e.g., FSA limits, EITC) means it’s a good time to revisit employer benefit offerings or retirement contributions.

  
  

• Software & workflow readiness: As a practice using cloud-based software like MyTAXPrepOffice, ensure your planning tools, tax software thresholds, and documents are updated with the new numbers so you can serve clients efficiently.

  
  

Action Plan for Tax Pros

1. Update planning spreadsheets and software inputs — Ensure your return software and checklists reflect the new 2026 standards and credits.

   
   

2. Communicate with clients — Send a short memo or newsletter alerting clients to the standard deduction increase, estate tax change, and other major adjustments.

   
   

3. Use year-end strategies — For clients considering large transactions (estate gifts, large contributions, timing income etc.), these numbers matter now.

   
   

4. Group clients by impact:

   • Low-to-middle income — standard deduction increases and EITC updates matter most

   • High income — bracket thresholds, estate exclusions, and deduction limits

   • Business owners — credits, FSA limits, employee benefit strategies

     
     

5. Monitor IRS guidance — While the inflation numbers are released, further IRS or Treasury guidance may refine implementation details. Stay in the loop.

   
   

Final Thoughts

The 2026 inflation adjustments mark another important milestone in tax planning—and this year, they come with the added complexity of the OBBBA changes. As a tax professional, staying proactive, updating your tools, and reaching out to your client base can differentiate you in a crowded market. With MyTAXPrepOffice’s cloud-based suite, you’re positioned well to adapt efficiently and lead clients into the next tax season with confidence.

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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.