The U.S. government (through the IRS) has released important updates to tax rates and key financial limits for the 2026 tax year. These changes are a result of inflation adjustments and new laws, affecting income tax, health plans, and credits for families.
💰 Income Tax Rates and Brackets
The top income tax rate of 37% will remain for the wealthiest Americans.
For a single person, this top rate applies to income above $640,600. For a married couple filing jointly, it starts at $768,700.
Here are the other tax brackets for single individuals (married couples’ thresholds are generally double):
- 35% Rate: Applies to income over $256,225.
- 32% Rate: Applies to income over $201,775.
- 24% Rate: Applies to income over $105,700.
- 22% Rate: Applies to income over $50,400.
- 12% Rate: Applies to income over $12,400.
- 10% Rate (Lowest): Applies to income of $12,400 or less.
💼 Major Increases for Employers and Families
Several tax credits and benefit limits are going up:
- Employer Childcare Credit is Boosted: A big win for businesses, the maximum tax credit an employer can claim for providing childcare to employees has been significantly increased from $150,000 to $500,000.
- Earned Income Tax Credit (EITC): The maximum EITC for taxpayers with three or more children is now $8,231, up from the previous year.
- Adoption Credit: Families adopting a child can claim a maximum credit of up to $17,670 in qualified expenses.
🏡 Estate and Gift Tax Exclusion
For people who pass away in 2026, their estates will receive a much higher exclusion before the federal estate tax kicks in. The new basic exclusion amount is $15,000,000, a significant jump from the $13,990,000 limit in 2025.
The annual exclusion for gifts remains at $19,000.
⚕️ Health and Workplace Benefits
Adjustments have been made to popular health and workplace accounts:
- Health Flexible Spending Accounts (FSAs): Employees can now contribute up to $3,400 of pre-tax money to their health FSA, an increase of $100.
- If a plan allows for a rollover, the maximum carryover amount is now $680.
- Qualified Transportation Benefits: The monthly limit for both mass transit and qualified parking benefits increases by $15 to $340.
- Medical Savings Accounts (MSAs): The deductibles and out-of-pocket limits for MSAs have been adjusted upwards for both self-only and family coverage.
🌍 Foreign Earnings and Other Rules
- Foreign Earned Income Exclusion: Americans working abroad can exclude up to $132,900 of their income from U.S. taxation.
- No Personal Exemptions: Personal exemptions will remain at $0 for 2026, continuing a rule established by prior tax law.
- Lifetime Learning Credit (LLC): The income limits to phase out the Lifetime Learning Credit remain unchanged, meaning they were not adjusted for inflation.
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