The Internal Revenue Service (IRS) has issued Revenue Procedure 2025-32, which modifies prior guidance (Rev. Proc. 2024-40) to incorporate statutory changes made by Public Law 119-21, 139 Stat. 72 (July 4, 2025), commonly known as the One, Big, Beautiful Bill Act (OBBBA). This Revenue Procedure sets forth the inflation-adjusted items pertinent to the 2026 taxable year for various provisions of the Internal Revenue Code (Code), adjustments which are generally determined by reference to Code Section 1(f).

This document details the key adjustments applicable for the 2026 taxable year, citing the specific Code sections and corresponding Revenue Procedure sections where the adjusted amounts are located. Tax professionals should note that unless otherwise specified, all references to "section" or "§" refer to provisions of the Internal Revenue Code.

Adjustments to Individual Income Tax and Rate Tables

The tax rate tables under Code Section 1 for taxable years beginning in 2026 reflect the permanence of the existing seven rates (10%, 12%, 22%, 24%, 32%, 35%, and 37%) for individuals, as established by Section 70101 of the OBBBA amending Code Section 1(j). The existing four tax rates (10%, 24%, 35%, and 37%) remain in effect for estates and trusts.

The specific adjusted income thresholds for 2026 (Code Section 1(j)(2)(A)-(D)) are provided in the Revenue Procedure:

Filing Status	10% Bracket Ends	12% Bracket Ends	22% Bracket Ends	24% Bracket Ends	32% Bracket Ends	35% Bracket Ends	37% Bracket Starts
Married Filing Jointly / Surviving Spouses	Not over $24,800	Over $24,800 but not over $100,800	Over $100,800 but not over $211,400	Over $211,400 but not over $403,550	Over $403,550 but not over $512,450	Over $512,450 but not over $768,700	Over $768,700
Heads of Households	Not over $17,700	Over $17,700 but not over $67,450	Over $67,450 but not over $105,700	Over $105,700 but not over $201,775	Over $201,750 but not over $256,200	Over $256,200 but not over $640,600	Over $640,600
Unmarried Individuals (Single)	Not over $12,400	Over $12,400 but not over $50,400	Over $50,400 but not over $105,700	Over $105,700 but not over $201,775	Over $201,775 but not over $256,225	Over $256,225 but not over $640,600	Over $640,600
Married Filing Separate Returns	Not over $12,400	Over $12,400 but not over $50,400	Over $50,400 but not over $105,700	Over $105,700 but not over $201,775	Over $201,775 but not over $256,225	Over $256,225 but not over $384,350	Over $384,350

For Estates and Trusts (Code Section 1(j)(2)(E)), the thresholds are: Not over $3,300 (10%); Over $3,300 but not over $11,700 (24%); Over $11,700 but not over $16,000 (35%); and Over $16,000 (37%).

Maximum Capital Gains Rate

For purposes of determining the zero percent and 15 percent capital gains rates (Code Sections 1(h), 1(j)(5)), the adjusted income thresholds for taxable years beginning in 2026 are:

Filing Status	Maximum Zero Rate Amount	Maximum 15% Rate Amount
Married Individuals Filing Joint Returns and Surviving Spouse	$98,900	$613,700
Married Individuals Filing Separate Returns	$49,450	$306,850
Heads of Household	$66,200	$579,600
All Other Individuals	$49,450	$545,500
Estates and Trusts	$3,300	$16,250

Standard Deduction Adjustments

The basic standard deduction amounts (Code Section 63(c)(2)) were made permanent and further increased by the OBBBA, effective for taxable years beginning after December 31, 2024. For 2026, the adjusted standard deduction amounts (Rev. Proc. Section 4.14(1)) are:

Married Individuals Filing Joint Returns and Surviving Spouses: $32,200.
Heads of Households: $24,150.
Unmarried Individuals (Single) and Married Individuals Filing Separate Returns: $16,100.

The additional standard deduction amount (Code Section 63(f)) for the aged or the blind is $1,650. If the individual is also unmarried and not a surviving spouse, this additional amount increases to $2,050.

For an individual claimed as a dependent (Code Section 63(c)(5)), the standard deduction cannot exceed the greater of (1) $1,350, or (2) the sum of $450 and the individual’s earned income.

Alternative Minimum Tax (AMT) Parameters

Section 70107 of the OBBBA made the temporary increases in AMT exemption amounts and phaseout thresholds permanent. For taxable years beginning in 2026 (Rev. Proc. Section 4.10):

The AMT exemption amounts (Code Section 55(d)(1)) are:

Joint Returns or Surviving Spouses: $140,200.
Unmarried Individuals (other than Surviving Spouses): $90,100.
Married Individuals Filing Separate Returns: $70,100.
Estates and Trusts: $31,400.

The amounts used to determine the phaseout of the exemption amounts (Code Section 55(d)(2)) are:

Filing Status	Threshold Phaseout Amount	Complete Phaseout Amount
Joint Returns or Surviving Spouses	$1,000,000	$1,280,400
Unmarried Individuals	$500,000	$680,200
Married Individuals Filing Separate Returns	$500,000	$640,200
Estates and Trusts	$104,800	$167,600

For a child subject to the "kiddie tax" (Code Sections 55(d) and 59(j)), the AMT exemption amount may not exceed the sum of (1) the child’s earned income, plus (2) $9,750.

Adjustments Related to Credits

Child Tax Credit (Code Section 24)

The OBBBA amended Code Section 24 to make the increased and expanded child tax credit permanent. For taxable years beginning in 2026 (Rev. Proc. Section 4.05):

The maximum amount of the credit allowed (Code Section 24(a)) is $2,200.
The amount used to determine the refundable portion of the credit (Code Section 24(d)(1)(A)) is $1,700.

Earned Income Credit (EIC) (Code Section 32)

For taxable years beginning in 2026 (Rev. Proc. Section 4.06), the key parameters for the EIC are:

Item	One Qualifying Child	Two Qualifying Children	Three or More Qualifying Children	None
Earned Income Amount	$13,020	$18,290	$18,290	$8,680
Maximum Amount of Credit	$4,427	$7,316	$8,231	$664
Threshold Phaseout Amount (Married Filing Jointly)	$31,160	$31,160	$31,160	$18,140
Completed Phaseout Amount (Married Filing Jointly)	$58,863	$65,899	$70,224	$26,820
Threshold Phaseout Amount (All other filing statuses)	$23,890	$23,890	$23,890	$10,860
Completed Phaseout Amount (All other filing statuses)	$51,593	$58,629	$62,974	$19,540

The credit is disallowed (Code Section 32(i)) if the aggregate amount of certain investment income exceeds $12,200.

Adoption Credit and Assistance Programs (Code Sections 23, 137)

For taxable years beginning in 2026 (Rev. Proc. Sections 4.04, 4.18):

The credit allowed for the adoption of a child with special needs (Code Section 23(a)(3)) is $17,670. The maximum credit allowed for other adoptions is capped at qualified adoption expenses up to $17,670 (Code Section 23(b)(1)).
The credit begins to phase out (Code Section 23(b)(2)(A)) for taxpayers with modified adjusted gross income (MAGI) exceeding $265,080 and is completely phased out at MAGI of $305,080 or more.
The refundable portion of the credit (Code Section 23(a)(4)) is $5,120.
The maximum exclusion from gross income for adoption assistance programs (Code Section 137(a)(2), 137(b)(1)) is $17,670. The phaseout limits for the exclusion match the credit phaseout limits (MAGI exceeding $265,080 to $305,080 or more).

Other Key Credits

Employee Health Insurance Expense of Small Employers (Code Section 45R): For taxable years beginning in 2026, the dollar amount used to determine eligibility for the small employer health insurance credit and to limit the credit (Code Section 45R(d)(3)(B)) is $34,100.
Low-Income Housing Credit (Code Section 42(h)): For calendar year 2026, the State housing credit ceiling amount is the greater of (1) $3.05 multiplied by the State population, or (2) $3,530,000.
Rehabilitation Expenditures Treated as Separate New Building (Code Section 42(e)): For calendar year 2026, the per low-income unit qualified basis amount is $8,700.

Adjustments Related to Deductions and Exclusions

Election to Expense Certain Depreciable Assets (Code Section 179)

The OBBBA amended Code Section 179 to increase both the maximum expensing amount and the phaseout threshold. For taxable years beginning in 2026 (Rev. Proc. Section 4.24):

The maximum aggregate cost a taxpayer may elect to expense (Code Section 179(b)(1)) cannot exceed $2,560,000.
The phaseout threshold (Code Section 179(b)(2)) begins when the cost of Code Section 179 property placed in service during the year exceeds $4,090,000.
The cost of any sport utility vehicle that may be taken into account (Code Section 179(b)(5)(A)) cannot exceed $32,000.

Qualified Business Income (QBI) Deduction (Code Section 199A)

For taxable years beginning in 2026 (Rev. Proc. Section 4.26), the threshold amounts (Code Section 199A(e)(2)) and phase-in range amounts (Code Section 199A(b)(3)(B)) are adjusted:

Filing Status	Threshold Amount	Phase-in Range Amount (Threshold to Phaseout Completion)
Married Individuals Filing Joint Returns	$403,500	$553,500
Married Individuals Filing Separate Returns	$201,775	$276,775
All Other Returns	$201,750	$276,750

Note that the OBBBA added minimum deduction and QBI eligibility requirements for 2026 that will begin to adjust for inflation after 2026 (Code Section 199A(i)).

Health and Medical Account Limitations

Medical Savings Accounts (MSAs) (Code Section 220): For 2026 (Rev. Proc. Section 4.28), the high deductible health plan definitions are:
- Self-only coverage: Annual deductible must be at least $2,900 and not more than $4,400. Annual out-of-pocket expenses cannot exceed $5,850.
- Family coverage: Annual deductible must be at least $5,850 and not more than $8,750. Annual out-of-pocket expenses cannot exceed $10,700.
Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) (Code Section 9831(d)): For 2026 (Rev. Proc. Section 4.63), the total amount of payments and reimbursements cannot exceed $6,450 for self-only coverage or $13,100 for family coverage.
Cafeteria Plans (Code Section 125(i)): For 2026 (Rev. Proc. Section 4.15), the dollar limitation on voluntary employee salary reductions for contributions to health flexible spending arrangements is $3,400. If carryover is permitted, the maximum carryover amount is $680.
Eligible Long-Term Care Premiums (Code Section 213(d)(10)): For 2026 (Rev. Proc. Section 4.27), the limitations on premiums includible as "medical care" are:
- Age 40 or less: $500
- More than 40 but not more than 50: $930
- More than 50 but not more than 60: $1,860
- More than 60 but not more than 70: $4,960
- More than 70: $6,200

Education and Miscellaneous Deductions

Interest on Education Loans (Code Section 221): For 2026 (Rev. Proc. Section 4.29), the $2,500 maximum deduction begins to phase out for MAGI exceeding $85,000 ($175,000 for joint returns) and is completely phased out at MAGI of $100,000 or more ($205,000 or more for joint returns).
U.S. Savings Bonds for Qualified Higher Education Expenses (Code Section 135): For 2026 (Rev. Proc. Section 4.17), the exclusion begins to phase out for MAGI above $152,650 for joint returns and $101,800 for all other returns. Phaseout is complete at $182,650 or more for joint returns and $116,800 or more for all other returns.
Educator Expenses (Code Section 62(a)(2)(D)): The deduction amount for expenses paid or incurred by an eligible educator is $350.
Foreign Earned Income Exclusion (Code Section 911): The exclusion amount is $132,900.
Transportation Fringe Benefit (Code Section 132(f)): The monthly exclusion limit for transportation in a commuter highway vehicle and transit passes is $340. The limit for qualified parking is also $340.
Energy Efficient Commercial Buildings Deduction (Code Section 179D): The applicable dollar value used to determine the maximum allowance (Code Section 179D(b)(2)) is $0.59 (increased up to $1.19 by $0.02 for each percentage point of reduction greater than 25 percent).

Accounting Method and Loss Limitations

Limitation on Use of Cash Method of Accounting (Code Section 448(c)): For 2026 (Rev. Proc. Section 4.30), a corporation or partnership meets the gross receipts test if its average annual gross receipts for the prior three-year period does not exceed $32,000,000.
Threshold for Excess Business Loss (Code Section 461(l)): For 2026 (Rev. Proc. Section 4.31), the threshold amount for determining an excess business loss is $256,000 ($512,000 for joint returns).

Estate and Gift Tax Items (Calendar Year 2026)

These amounts apply to transactions or events occurring in calendar year 2026 (Rev. Proc. Section 5.03).

Annual Exclusion for Gifts (Code Section 2503(b)): The first $19,000 of gifts to any person (other than future interests) is not included in the total amount of taxable gifts.
Gift Exclusion to Non-Citizen Spouse (Code Section 2523(i)): The annual exclusion for gifts to a spouse who is not a U.S. citizen is $194,000.
Covered Expatriate Gift/Bequest Exception (Code Section 2801(c)): The tax imposed on covered gifts or bequests applies only to the extent that the value exceeds $19,000.
Special Use Valuation Limitation (Code Section 2032A): The aggregate decrease in the value of qualified real property resulting from the special use valuation election cannot exceed $1,460,000.
Interest on Estate Tax Payable in Installments (Code Section 6601(j)): The dollar amount used to determine the "2-percent portion" of the estate tax extended as provided in Code Section 6166 is $1,940,000.
Expatriation Tax Avoidance (Code Section 877): An individual is a covered expatriate if their "average annual net income tax" for the five taxable years ending before the expatriation date is more than $211,000.
Expatriation Tax Responsibilities (Code Section 877A): The amount includible in gross income of a covered expatriate by reason of Code Section 877A(a)(1) is reduced (but not below zero) by $910,000.

Compliance and Penalty Adjustments (Returns Required to be Filed in 2027)

These penalties apply to returns required to be filed in calendar year 2027.

Failure to File Tax Return (Code Section 6651(a)): The minimum addition to tax for failure to file an income tax return within 60 days will not be less than the lesser of $535 or 100 percent of the tax shown on the return.
Failure to File Correct Information Returns (Code Section 6721):
- General penalty per return: $340.
- Maximum penalty for large corporations (gross receipts > $5,000,000): $4,191,500.
- Maximum penalty for small firms (gross receipts $\le$ $5,000,000$): $1,397,000.
- Intentional disregard failure under Code Section 6050I(a) (cash receipts over $10,000): Greater of $34,930 or amount of cash received up to $139,500.
Failure to Furnish Correct Payee Statements (Code Section 6722): The general penalty per statement is $340. The calendar year maximum penalties mirror those under Code Section 6721 for large and small firms.
Failure to File Partnership Return (Code Section 6698) or S Corporation Return (Code Section 6699): The dollar amount used to determine the penalty is $260.
Tax Preparer Penalties (Code Section 6695): Penalties for failure to furnish a copy to the taxpayer, sign the return, furnish an identifying number, or retain copies (Code Section 6695(a)-(e)) are $65 per failure, with a maximum of $33,000. The penalty for failure to be diligent in determining eligibility for specific credits (e.g., EIC, CTC) is $665 per failure.
Qualified Opportunity Fund and Rural Opportunity Fund Reporting (Code Section 6726): The penalty for failure to file is $510 per day, with a maximum of $10,000 per return ($51,000 if gross assets exceed $10,230,000). If due to intentional disregard, the penalty is $2,550 per day, with a maximum of $51,000 ($255,000 if gross assets exceed $10,230,000).

Federal Tax Lien, Levy, and Legal Fees

These amounts apply to calendar year 2026 transactions or events (Rev. Proc. Section 5.03).

Persons Against Whom a Federal Tax Lien Is Not Valid (Code Section 6323): A federal tax lien is not valid against purchasers in a casual sale of personal property for less than $2,000, or against a mechanic’s lienor who repaired residential property if the contract price is not more than $10,010.
Property Exempt from Levy (Code Section 6334(a)): The value of property exempt from levy for household personal effects (Code Section 6334(a)(2)) cannot exceed $11,980. The value of books and tools necessary for a trade or business (Code Section 6334(a)(3)) cannot exceed $5,990.
Exempt Amount of Wages, Salary, or Other Income (Code Section 6334(d)): The dollar amount used to calculate the exempt amount is $5,300.
Revocation or Denial of Passport (Code Section 7345): The threshold amount constituting a "serious delinquent tax debt" is $66,000.
Attorney Fee Awards (Code Section 7430): The attorney fee award limitation for fees incurred in calendar year 2026 is $260 per hour.

Prepared with assistance from NotebookLM.