Every year the Internal Revenue Service adjusts dozens of tax figures for inflation, and the 2027 update is now out. The IRS released the tax year 2027 annual inflation adjustments for nearly 70 tax provisions, including marginal tax rates, the standard deduction and the earned income tax credit. These numbers generally apply to returns filed in 2028, so now is the right time to plan.
At Orange Law, we get many questions each fall about what these changes mean for individuals, families and business owners. Here is a clear breakdown.
The Big Headline: Rates Stay the Same, Thresholds Go Up
Despite the phrase “new tax rates” in many headlines, the rates themselves have not changed. The seven brackets (10%, 12%, 22%, 24%, 32%, 35% and 37%) remain in place. What has changed is the income thresholds at which each rate applies. They have been raised to account for inflation. This protects taxpayers from “bracket creep,” where a cost-of-living raise pushes more of your income into a higher bracket even though your real purchasing power has not improved.
The adjustment this year is around 3.2%, which is larger than in the previous two years. The seven-bracket structure is also locked in. The One Big Beautiful Bill Act (OBBBA), signed in July 2025, made the individual rate structure permanent.
2027 Federal Income Tax Brackets
Here are the taxable income ranges for the two most common filing statuses:
| Rate | Single Filers | Married Filing Jointly |
| 10% | Up to $12,800 | Up to $25,600 |
| 12% | $12,801 – $52,025 | $25,601 – $104,050 |
| 22% | $52,026 – $109,125 | $104,051 – $218,250 |
| 24% | $109,126 – $208,325 | $218,251 – $416,650 |
| 32% | $208,326 – $264,550 | $416,651 – $529,100 |
| 35% | $264,551 – $661,375 | $529,101 – $793,650 |
| 37% | Over $661,375 | Over $793,650 |
Remember that these are marginal rates. Only the income inside each range is taxed at that rate. Moving into a higher bracket does not mean all your income is taxed at the higher rate.
Higher Standard Deduction
The standard deduction also goes up for 2027:
- Married filing jointly: $33,200, up $1,000 from 2026
- Single and married filing separately: $16,600
- Head of household: $24,925
A higher standard deduction means more income is shielded from federal tax before the brackets apply. Fewer households will find it worthwhile to itemize.
Child Tax Credit Increases
Families get a modest boost. The maximum child tax credit for 2027 is $2,300, an increase of $100 from 2026, and the refundable portion rises to $1,800. The earned income tax credit also increases. The maximum EITC for taxpayers with three or more qualifying children is $8,496, up from $8,231.
Alternative Minimum Tax (AMT)
For 2027, the AMT exemption for unmarried individuals is $93,000, phasing out at $515,950. For joint filers, the phase-out begins at $1,031,900. High earners with significant deductions, stock options or certain investment income should review their exposure.
Estate and Gift Tax Changes
For clients focused on wealth transfer, the 2027 numbers are important:
- Estate tax exclusion: $15,480,000 for decedents dying in 2027, up from $15,000,000 in 2026.
- Annual gift exclusion: $20,000 per recipient, up from $19,000
- Gifts to a non-citizen spouse: $201,000, up from $194,000
Gifting within the annual exclusion is a simple way to reduce a taxable estate over time without filing a gift tax return.
Benefits for Business Owners
Business owners also see higher limits:
- Section 179 expensing: up to $2,640,000, compared with $2,560,000 in 2026
- SUV deduction limit under Section 179: $33,1
- Employer-provided childcare credit: up to $515,943.67, or $619,132.40 for eligible small businesses
These increases can create real opportunities for equipment purchases and capital planning, especially when timed with your overall tax strategy.
Workplace Benefits
Several employee benefit limits rise too:
- Health FSA contributions: $3,500, up $100
- Transportation and parking benefits: $350 per month, up $10
- Adoption credit: up to $18,250 of qualified expenses
What Did Not Change
Not everything is indexed. Personal exemptions remain at zero, and the Lifetime Learning Credit phase-out range is still not adjusted for inflation. This is why some families feel the benefit of the adjustments unevenly.
Practical Steps to Take Now
- Review your withholding. Higher brackets and a larger standard deduction may change how much should come out of your paycheck. Updating your W-4 can prevent over- or under-withholding.
- Plan income and deductions. If you are near a bracket edge, timing bonuses, retirement contributions, or charitable giving may reduce your overall liability.
- Revisit your estate plan. With a higher exclusion, existing wills and trusts may need updating to reflect current law and your goals.
- Coordinate business purchases. Equipment and vehicle purchases can be planned around the higher Section 179 limits.
- Check your state taxes. Federal changes do not always carry over to state returns, and the interaction can be complex.
Why Professional Guidance Matters
Tax law is rarely just about numbers. Filing status, family structure, business ownership, investments and estate goals all interact in ways that a generic bracket chart cannot capture. A small planning decision made before year-end can sometimes lead to significant savings, while a missed deadline or misread rule can be costly.
At Orange Law, we help individuals, families and business owners understand how these updates affect their specific situation and build practical strategies to stay compliant while keeping their tax burden as low as the law allows.