2027 Tax Brackets: IRS Announces 3.2% Increase and Higher SALT Limits

The Internal Revenue Service released the 2027 tax parameters on Thursday.

The agency set income tax brackets to rise by approximately 3.2% to match current inflation levels. This adjustment follows a 2% increase applied to this year's tax returns.

The standard deduction is increasing by $500 for single filers, reaching $16,600. Married couples filing jointly will see a $1,000 increase, bringing their deduction to $33,200. These changes are part of a long-standing process that indexes roughly 70 tax provisions to inflation to prevent taxpayers from being pushed into higher rates without actual income growth.

The 3.2% bracket increase is lower than the 7% jump seen after the high inflation of 2022. However, it reflects the impact of recent economic pressures, including higher energy costs related to the standoff between America and Iran. The Social Security Administration separately announced a 3.6% cost-of-living adjustment for next year's benefits, up from the 2.8% increase in the current year.

The 2027 figures mark the second full year under the Republican tax law passed in 2025. That legislation froze tax rates and expanded the standard deduction. It also raised the child tax credit to a maximum of $2,200 per child. For 2027, the IRS says that credit will rise to $2,300 per eligible child due to inflation indexing.

Taxpayers aged 65 and older will receive additional benefits. The supplemental standard deduction for seniors will increase by $2,100 for single filers and $1,700 per person for married couples. The law also created a senior bonus worth up to $12,000 for married couples. This bonus is available to individuals with a modified adjusted gross income below $75,000 and joint filers below $150,000.

State and local tax deductions are expanding as well. The 2025 law allowed households to deduct up to four times the previous limit on state income and local property taxes. For 2026, that limit is $40,400. For 2027, the maximum SALT deduction will rise to $40,804. The income threshold at which this full deduction begins to phase out will increase to $510,050 for 2027. These specific increases were written into the law as 1% annual steps between 2026 and 2029, rather than being tied directly to inflation rates.

These new brackets will apply to tax returns filed in 2028 for income earned in 2027. The IRS has not yet released the final numbers for retirement account contribution limits, such as those for 401(k)s and IRAs.