The IRS has released its inflation adjustments for tax year 2026. These adjustments cover more than 60 tax provisions, including the tax rate schedules, and generally apply to returns filed in 2027. In other words, these are the numbers to plan around right now, before the year ends.

Standard Deduction

For 2026, the standard deduction rises to $32,200 for married couples filing jointly, $16,100 for single filers and married individuals filing separately, and $24,150 for heads of household.

If your itemized deductions — mortgage interest, state and local taxes, charitable contributions — are close to these amounts, it is worth running the numbers both ways. A higher standard deduction may mean itemizing is no longer worth the paperwork.

Tax Brackets

The seven federal rates stay the same, but the income ranges move up. The top 37% rate applies to single filers with income above $640,600 and married couples filing jointly above $768,700.

For Bay Area households, the 32% and 35% brackets are often the ones that matter most. The 32% rate starts above $201,775 for single filers ($403,550 for joint filers), and the 35% rate starts above $256,225 ($512,450 for joint filers).

Because the thresholds shift upward each year, a portion of income that would have been taxed at a higher rate in 2025 may fall into a lower bracket in 2026. This is worth factoring in if you have flexibility over the timing of income or deductions.

Estate and Gift Planning

Estates of people who die in 2026 have a basic exclusion amount of $15,000,000, up from $13,990,000 for 2025. The annual gift exclusion stays at $19,000 per recipient.

If you have been thinking about gifting assets to family members, the annual exclusion lets you transfer up to $19,000 per person per year without using any of your lifetime exemption.

Health Spending Accounts

The limit for employee contributions to a health FSA increases to $3,400 for 2026. If your employer's open enrollment is coming up this fall, this is a good time to review your election. FSA contributions reduce your taxable income dollar for dollar.

What This Means for You

Higher brackets and a larger standard deduction can change whether itemizing still makes sense, how much to withhold, and the timing of income or deductions before December 31. A short planning review in the fall can help you avoid surprises in April.

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Source: IRS, IR-2025-103, "IRS releases tax inflation adjustments for tax year 2026" — irs.gov/newsroom

This article is for general information only and is not tax advice. Contact Bay Tax Services at (408) 378-9303 to discuss your situation.