IRS Makes Major Tax Updates for 2025 and 2026 — Here’s What You Need to Know

The IRS has rolled out several new tax adjustments that will directly affect how much Americans owe — or save — on their 2025 and 2026 tax returns. These changes stem from both inflation and the new federal tax law enacted in July, and they’re expected to bring modest but real relief to millions of taxpayers.

From a higher standard deduction to updated tax brackets and a more generous Earned Income Tax Credit (EITC), the adjustments reflect the IRS’s effort to keep pace with rising costs and make the tax code fairer for working families.

Let’s break down what’s changing, who benefits most, and how to plan ahead.

Why the IRS Is Making These Changes

Each year, the IRS updates key parts of the tax code to account for inflation — things like deductions, income thresholds, and credit amounts. But this time, inflation isn’t the only factor.

The recently passed federal tax reform bill introduced new structural changes that affect how much of your income is taxable and how credits are calculated.

“Many taxpayers will see modest relief simply because the deductions and thresholds move upward,” said Tom O’Saben, Director of Tax Content at the National Association of Tax Professionals. “Inflation will take less of a bite.”

Higher Standard Deductions: More Income in the “Zero Bracket”

For most Americans, the standard deduction is the biggest tax break available — and the IRS just made it bigger.

For the 2025 tax year (the return you’ll file in April 2026):

• Single filers: $15,750 (up from $15,000)
• Married couples filing jointly: $31,500 (up from $30,000)
• Heads of household: $23,625 (up from $22,500)

Then, for the 2026 tax year, the deduction rises again due to inflation:

• Single filers: $16,100
• Married couples filing jointly: $32,200
• Heads of household: $24,150

This means more of your income will fall into what experts call the “zero bracket” — the portion that isn’t taxed at all.

If you typically itemize deductions (like mortgage interest or charitable giving), it’s worth comparing the numbers. With the new higher thresholds, many households will benefit more from taking the standard deduction instead.

Updated IRS Tax Brackets for 2026

The IRS has also adjusted the federal income tax brackets for inflation, which determines how much of your income is taxed at each rate. These updated brackets prevent “bracket creep,” where inflation pushes you into a higher tax bracket even if your real purchasing power hasn’t increased.

Here are the 2026 tax brackets:

Not all brackets increased at the same rate — some grew by about 3.9%, others by around 2.3%.

According to O’Saben, “The uneven increases are normal artifacts of the IRS’s inflation adjustment formula, not a deliberate policy to favor one income level over another.”

In simpler terms, the changes aim to reflect inflation patterns, not create winners and losers.

Bigger Earned Income Tax Credit (EITC) for 2026

Low- and middle-income households will see an additional benefit next year through a larger Earned Income Tax Credit (EITC).

The EITC directly reduces the amount of tax you owe, and because it’s refundable, you can still receive a refund even if you owe little or nothing in taxes.

For 2026, the IRS has increased the maximum EITC for families with three or more children to $8,231, up from $8,046 in 2025.

That’s roughly a $185 increase — and for qualifying households, that can make a big difference in overall cash flow, especially during tax season.

The SALT Deduction Cap: Who Benefits the Most?

The new tax law also raised the cap on the State and Local Tax (SALT) deduction to $40,000, up from the previous limit of $10,000 set back in 2017.

This change is a significant win for homeowners in high-tax states such as California, New York, and New Jersey — where state income and property taxes are both steep.

However, even outside those states, some households will see benefits, especially if they own property or have large local tax bills.

How These Updates Could Affect Your 2025 and 2026 Returns

The exact impact depends on your income level and filing status.

• Middle-income families will likely see the most noticeable relief due to the higher standard deduction and wider brackets.
• High earners may benefit from slightly slower bracket creep and the restored SALT deduction.
• Lower-income workers will gain from the increased EITC and more favorable filing thresholds.

Overall, the IRS’s adjustments are expected to reduce the average tax burden slightly while simplifying the process for many filers.

How to Prepare for These Tax Changes

To make the most of the new tax rules, consider these steps before the end of the year:

1. Review your withholding: Use the IRS Tax Withholding Estimator to make sure your employer is withholding the right amount.
2. Check eligibility for credits: If you have dependents, make sure you’re claiming the Child Tax Credit and EITC where eligible.
3. Plan for itemization vs. standard deduction: With higher thresholds, many taxpayers will find it easier and cheaper to take the standard deduction.
4. Stay updated on future IRS guidance: As inflation and policy evolve, more adjustments could be announced before the next filing season.

About the Author

Elias Vennor is a professional writer and editor at EPfortal.com, specializing in Finance and Trending Topics. With a strong background in content research and journalism, Elias Vennor is dedicated to delivering accurate, well-sourced, and timely information to help needy peoples. Their articles follow strict editorial standards, relying on official sources and verified data to ensure credibility. Covering the latest Finance and more related Topics, Elias Vennor aims to make Updated information accessible and easy to understand for all readers.