IRS 2027 tax changes: Millions of Americans could pay less tax as standard deductions rise, income brackets widen and child credits get bigger

IRS 2027 tax changes: Millions of Americans will get a higher standard deduction and more room before moving into the next federal income tax bracket in 2027. The IRS announced the changes on November 5, covering nearly 70 provisions of the tax code. The standard deduction for single filers will rise to $16,600, while married couples filing jointly will get $33,200.

Families will also see the Child Tax Credit increase to $2,300 per qualifying child.

The changes could make a difference to household tax bills, particularly for workers, parents and low-income families.

IRS 2027 standard deduction increases for single and married filers

The standard deduction is going up across the main filing categories. It is the amount taxpayers can subtract from their income before calculating federal income tax. Most people who claim it do not need to itemise their expenses or keep receipts for individual deductions.

Here is what taxpayers can claim in 2027:

• Single filers: $16,600, up from $16,100.
• Married couples filing jointly: $33,200, compared with $32,200.
• Married people filing separately: $16,600.
• Heads of household: $24,925, up from $24,150.

The increase means a larger portion of income will be excluded from taxable income. For someone whose salary has not kept pace with inflation, that could offer some relief when filing taxes.

IRS 2027 income tax brackets: Seven rates remain unchanged

The federal income tax rates are staying at 10%, 12%, 22%, 24%, 32%, 35% and 37%. The change is in the income thresholds. Taxpayers will be able to earn more before reaching the next bracket.

The IRS has adjusted the thresholds following a 3.2% rise in the Consumer Price Index, according to Forbes.

The 2027 federal income tax brackets are:

• 10%: Up to $12,800 for single filers and $25,600 for married couples filing jointly.
• 12%: $12,801 to $52,025 for single filers and $25,601 to $104,050 for joint filers.
• 22%: $52,026 to $109,125 for single filers and $104,051 to $218,250 for joint filers.
• 24%: $109,126 to $208,325 for single filers and $218,251 to $416,650 for joint filers.
• 32%: $208,326 to $264,550 for single filers and $416,651 to $529,100 for joint filers.
• 35%: $264,551 to $661,375 for single filers and $529,101 to $793,650 for joint filers.
• 37%: $661,376 or more for single filers and $793,651 or more for joint filers.

Moving into a higher tax bracket does not mean the entire income is taxed at the higher rate.

Consider a single filer with $53,025 in taxable income. The first $52,025 falls within the lower brackets. Only the remaining $1,000 is taxed at 22%. That means a $220 tax charge on that portion, not 22% of the entire income.

The wider brackets could help workers whose salaries have increased over the past year. Without inflation adjustments, some taxpayers could end up paying higher rates simply because their nominal income has risen.

Child Tax Credit rises to $2,300 per qualifying child

Parents will get a little more support through the Child Tax Credit. The maximum credit will increase from $2,200 to $2,300 for each qualifying child in 2027.

The refundable portion is also rising, from $1,700 to $1,800. This matters to eligible families whose tax bill is lower than the available credit because the refundable amount can still be paid as a tax refund.

For a household with two qualifying children, the total credit will increase from $4,400 to $4,600.

The Earned Income Tax Credit is getting a separate increase. Families with three or more qualifying children will be able to claim up to $8,496, compared with $8,231 in 2026.

The credit is designed to support workers and families with lower incomes. Those unsure about their eligibility can use the EITC Assistant on the IRS website.

IRS 2027 gift tax limit increases to $20,000

People planning to give money to family members will have a higher annual exclusion in 2027.

The gift tax exclusion will rise to $20,000 per recipient, compared with $19,000 in 2026. This allows individuals to give money to children, grandchildren or other recipients within the annual limit without triggering federal gift tax reporting under the exclusion rules.

For families planning financial support or early wealth transfers, the additional $1,000 offers more flexibility. The limit applies separately to each recipient.

401(k) contribution limit for 2027: What savers should expect

Retirement savers do not yet have a confirmed 401(k) contribution limit for 2027.

Milliman, an actuarial and consulting firm, estimates that the employee contribution limit for 401(k), 403(b) and 457 plans could reach $25,500. That would be an increase of $1,000 from the 2026 limit of $24,500.

The figure is not official. The IRS has not confirmed the 2027 contribution limit, so workers should wait for the agency's announcement before adjusting their retirement contributions.