Have you ever felt like you got a raise, but you’re still paying more taxes without seeing any extra money in your paycheck? It’s not your imagination. In fact, the IRS is making adjustments to tax brackets that will take effect for the 2026 tax year. Starting with filings in 2027, millions of workers will see more money available in their biweekly paychecks.
The standard deduction
Fortunately, you don’t have to pay tax on everything you earn each year. You don’t pay tax on your income after certain reductions have been applied. The first tax shield is the standard deduction, which is a fixed amount that is automatically subtracted from your total gross income. This ensures that the first few dollars you earn are protected at a zero federal tax rate.
This is a significant initial discount for almost all taxpayers. However, due to inflation, this amount must increase each year, as otherwise it would affect the economic capacity of citizens. If the deduction remained fixed, this tax shield would become smaller over time. This figure is set to change by 2026:
- Married couples filing jointly will have a standard deduction of $32,200.
- Single filers will have a standard deduction of $16,100. In total, this is an increase of $350 over the previous year.
- For Heads of Households (HOH), the deduction will rise to $24,150… representing an increase of $525 in income that will not be subject to tax.
The main problem: “Bracket Creep”
This term describes a tax increase that no one voted for in Congress. It occurs when inflation is high and nominal wages—that is, the number of dollars people receive in their paychecks—increase to compensate for it. Although your real purchasing power remains the same (you can still buy the same things at the supermarket, but nothing more), the IRS sees you as if you were richer.
The trap is that inflation artificially pushes citizens into a higher tax bracket, meaning they have to pay more taxes… without actually becoming richer, since they can afford exactly the same things they consumed before.
By falling into a higher tax bracket, you end up paying a higher percentage of tax on the same purchasing power. The IRS attempts to avoid this problem through a process called “indexing.” The IRS adjusts tax bracket limits annually based on an inflation indicator. (Let’s be honest, the government will never admit the real inflation rate the country is experiencing, even though we see it every time we fill our shopping cart, buy a car, or try to buy a home.)
Meanwhile, the IRS tries to maintain defenses against inflationary tax increases. Since they created the problem themselves—by issuing banknotes thanks to the fiat system—the least they can do is try to remedy it through taxation.
The new tax brackets for 2026
The US tax system is a progressive system. You never pay the highest rate on your entire income; instead, it is divided into portions… And each portion is taxed at a different rate. The highest rate (i.e., the marginal rate) only applies to the last dollars earned.
These are the official income Thresholds for Federal Tax Brackets 2026.[Note: For married couples filing jointly, the income limits are approximately double the figures shown.] They will be applied as it follows:
- 10% rate (lowest bracket): Applies to income up to $12,400.
- 12% rate: Applies to the portion of income exceeding $12,400, up to $50,400.
- 22% rate: Applies to the portion of income exceeding $50,400, up to $105,700.
- 24% rate: Applies to the portion of income exceeding $105,700, up to $201,775.
- 32% rate: Applies to the portion of income exceeding $201,775, up to $256,225.
- 35% rate: Applies to the portion of income exceeding $256,225, up to $640,600.
- 37% rate (the highest bracket): Applies to the portion of income exceeding $640,600.
These adjustments benefit all taxpayers, regardless of age. Review your W-4 withholdings right now. Make sure your employer is using the new 2026 brackets so you don’t overpay during the year. While it’s nice to get a refund from the IRS, it’s better not to lend them money at 0% interest!