New 2026 Tax Bracket Changes - What Does That Mean for You?
As a follow up to our previous insight post, Effectively Monetizing Your Annual Tax Brackets, The IRS has just announced new income tax brackets and standard deductions for 2026. While "tax brackets" might sound complex, these changes are largely positive for most taxpayers.
The IRS adjusts income thresholds annually due to inflation. This prevents "bracket creep," where inflation pushes you into a higher tax bracket even if your real income hasn't increased. In essence, you'll be able to earn more before a higher percentage of your income is taxed.
This important update is connected to The "One Big Beautiful Bill Act" (OBBBA), recently passed by the 119th Congress, which keeps in place the same progressive income tax rates established by the Tax Cuts and Jobs Act (TCJA) of 2017. The new legislation makes these individual tax rates, which were originally set to expire at the end of 2025, a permanent feature of the U.S. tax code. Moreover and perhaps most importantly, it provides certainty for taxpayers regarding the tax rate structure for the foreseeable future thus enabling advisors and clients to better plan and optimize their tax position for short and long term periods.
Key Takeaways for 2026:
Standard Deduction Increase: The standard deduction will rise to $32,200 for married couples filing jointly and $16,100 for single filers.
Additional Deduction for Seniors: Individuals aged 65 and older may qualify for an additional deduction of up to $6,000. This provides more opportunity for tax and wealth planning opportunities to exclude even more income from being taxable.
Bracket Shifts: The tax brackets themselves will shift upward. This means many individuals will likely owe slightly less in federal taxes compared to previous years.
Even minor adjustments like these can significantly impact your take-home pay and tax refunds. It's a good opportunity to review your withholdings or consult Sakura Partners to understand how these new brackets might affect your personal finances.
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