2027 Tax Changes Lower Bills for Millions but Leave Some 2025 Breaks Stagnant

The Internal Revenue Service released its annual inflation adjustments for the 2027 tax year on Nov. 5, increasing the standard deduction and the child tax credit. These changes will apply to tax returns filed in 2028. The adjustments reflect a 3.2% rise in prices, which serves as the baseline for updating most tax figures.

For single filers, the standard deduction will climb from $16,100 to $16,600. Married couples filing jointly will see their deduction rise from $32,200 to $33,200, while heads of household can claim $24,925, up from $24,150. The child tax credit will increase by $100 to a maximum of $2,300 per child. The refundable portion of that credit will also rise by $100 to $1,800.

These adjustments translate to lower federal income tax bills for some households if their income remains constant. An AP calculation shows that a married couple earning $100,000 and using the standard deduction would pay $7,504 in federal income tax, down from $7,640. A single filer earning $60,000 would see their bill drop from $5,020 to $4,952. Workers whose wages increase with inflation may find their tax bills stay roughly the same.

The earned income tax credit is also rising. The maximum credit for a worker with no children will go from $664 to $685. For a family with two children, the maximum credit will increase from $7,316 to $7,552. The estate tax exclusion, which the 2025 law set at $15 million, will adjust to $15.48 million.

Not all tax provisions are increasing with inflation. Several breaks included in the 2025 law remain fixed in dollar amount. Workers can still deduct up to $25,000 in tip income and up to $12,500 in overtime pay, or $25,000 for joint filers. Individuals age 65 and older can claim an additional $6,000 deduction. These specific amounts do not adjust for price increases, meaning their value erodes slightly each year.

The top income tax rate remains at 37%. In 2027, this rate will apply to income above $661,375 for single filers and above $793,650 for married couples filing jointly. The fixed deductions for tips, overtime, and seniors are scheduled to end after the 2028 tax year unless Congress extends them.

The IRS noted that most increases are routine and occur annually based on how much prices have climbed. The 3.2% inflation figure drives the majority of the changes in the 2027 tax code, ensuring that tax brackets and credits keep pace with the cost of living.