As tax professionals (CPAs and EAs), we rely on timely and accurate guidance from the Internal Revenue Service (IRS) to determine proper inflation adjustments and interpret legislative changes. Rev. Proc. 2025-32 sets forth critical inflation-adjusted items for various provisions of the Internal Revenue Code (Code) for the 2026 taxable year, reflecting amendments made by the One, Big, Beautiful Bill Act (OBBBA), Public Law 119-21, 139 Stat. 72 (July 4, 2025). On October 17, 2025 the IRS announced changes to be made to the Revenue Procedure’s numbers, a new section was added and an updated version was posted on the IRS website.

The issuance of a revised version of Rev. Proc. 2025-32 on October 17, modifying the original October 9 version, signals necessary corrections and additions impacting several key inflation-adjusted amounts and the procedural description of OBBBA changes. This article details the specific modifications incorporated into the revised document, focusing on the affected Code sections and the magnitude of the changes.

Modifications to Section 2: Statutory Changes Detailed

Section 2 of the Revenue Procedure details statutory changes made by the OBBBA that necessitate modifications to previously issued guidance (Rev. Proc. 2024-40). The primary structural change in this section involves the addition of a new subsection pertaining to the low-income housing credit, which subsequently resulted in the renumbering of all following subsections.

Addition of Low-Income Housing Credit Amendment

The most notable substantive addition to Section 2 is the inclusion of a new subsection detailing an OBBBA amendment to the low-income housing credit.

Rev. Proc. Section: Section 2.05.
IRC Provision Impacted: § 42(h)(3)(I).
Detailed Change: This new section reports that Section 70422(a) of the OBBBA amends § 42(h)(3)(I) to increase the calculation amount used under § 42(h)(3)(C)(ii) to determine the State housing credit ceiling. This adjustment is effective for calendar years beginning after December 31, 2025. This addition was absent from the original October 9 version of the Revenue Procedure.

Renumbering of Subsequent OBBBA Amendments

Due to the insertion of new Section 2.05 concerning § 42(h)(3)(I), all subsequent OBBBA amendments previously detailed in the original Rev. Proc. 2025-32 were renumbered. For instance:

The provision regarding the Employee Health Insurance Expense of Small Employers (OBBBA Section 70401 amending § 45F), originally designated as Section 2.05, is now designated as Section 2.06.
The provision concerning the Alternative Minimum Tax (AMT) Exemption amounts (OBBBA Section 70107 amending § 55(d)(4)), originally designated as Section 2.06, is now Section 2.07.
This sequential renumbering continues through the Qualified Opportunity Fund penalty addition (§ 6726), which shifts from Section 2.15 in the original document to Section 2.16 in the revised document.

Modifications to Section 4: Revised Inflation-Adjusted Amounts for 2026

Section 4 provides the specific inflation-adjusted dollar limitations applicable for the 2026 taxable year. The revised Revenue Procedure adjusts two critical inflation-indexed amounts originally reported, specifically impacting the Low-Income Housing Credit calculation and a phaseout threshold for the Earned Income Credit.

Low-Income Housing Credit Ceiling Calculation

The revised Revenue Procedure makes a significant modification to the inflation-adjusted figures used for calculating the State housing credit ceiling under § 42(h).

Rev. Proc. Section: Section 4.08.
IRC Provision Impacted: § 42(h)(3)(C)(ii).
Detailed Change (Revised Oct 17 Position): For calendar year 2026, the amount used to calculate the State housing credit ceiling is the greater of (1) $3.416 multiplied by the State population, or (2) $3,953,600.
Original Oct 9 Position: The original guidance provided substantially lower amounts: the greater of (1) $3.05 multiplied by the State population, or (2) $3,530,000.

The revised guidance reflects an increase in both the per capita amount (from $3.05 to $3.416) and the minimum threshold amount (from $3,530,000 to $3,953,600).

Earned Income Credit Phaseout

A minor but important adjustment was made to one of the phaseout thresholds for the Earned Income Credit (EIC) applicable for 2026.

Rev. Proc. Section: Section 4.06(1).
IRC Provision Impacted: § 32(b).
Detailed Change (Revised Oct 17 Position): The Completed Phaseout Amount (Married Filing Jointly) for taxpayers with Three or More Qualifying Children is adjusted to $70,244.
Original Oct 9 Position: The original version had reported this specific Completed Phaseout Amount as $70,224.

This represents a $20 upward adjustment to the maximum Adjusted Gross Income (AGI) or earned income level at or above which no EIC is allowed for this specific filing and dependency status.

Foreign Gift Reporting Threshold Textual Clarification

A non-monetary textual modification was observed in the description of the authority related to foreign gift reporting requirements.

Rev. Proc. Section: Section 4.47.
IRC Provision Impacted: § 6039F.
Detailed Change: The revised October 17 version uses gender-neutral language, referencing the authority of "the Secretary of the Treasury or the Secretary’s delegate" to require recipients of large foreign gifts to report them.
Original Oct 9 Position: The original version used "the Secretary of the Treasury or her delegate". (Note: The aggregate gift value threshold for reporting remains $20,573 in both versions for 2026).

Areas of Consistency (No Changes to Indexed Amounts)

It is equally important to note the areas where the inflation-adjusted figures remained consistent between the October 9 and October 17 versions, confirming their stability for 2026 tax planning purposes [34-102, 14.g., $32,200 for MFJ) are confirmed.

Adoption Credit Refundable Portion (§ 23(a)(4)): The specific refundable portion of the adoption credit for 2026 remains $5,120.
Section 179 Expensing (§ 179): The aggregate cost limitation of $2,560,000 and the phaseout threshold beginning above $4,0 (MFJ) and the corresponding phase-in ranges for 2026 remain stable.
Information Return Penalties (§ 6721, § 6722): The 2027 filing year penalty amounts for failure to file correct information returns and payee statements, as detailed in Section 4.57 and Section 4.58, are unchanged.

In summary, tax professionals should note the addition of the description of the § 42(h)(3)(I) OBBBA change in Section 2.05 and be sure to utilize the revised, higher figures for the Low-Income Housing Credit ceiling calculations outlined in Section 4.08 (for § 42(h)(3)(C)(ii)) when planning for calendar year 2026 transactions and projections, as well as the slightly increased EIC phaseout for MFJ taxpayers with three or more children under Section 4.06(1) (for § 32(b)).

Be sure you are working with the updated (and now current) version of the Revenue Procedure as you undertake tax planning for the 2026 tax year.

Prepared with assistance from NotebookLM.