IRS raises the 2027 joint standard deduction to $33,200 and keeps the top tax rate at 37%

The Internal Revenue Service (IRS) set the standard deduction for married couples filing jointly at $33,200 for tax year 2027, up $1,000 from 2026, in its annual inflation adjustments announced on November 5. The top rate stays at 37%.

The 2027 thresholds, bracket by bracket

The adjustments cover almost 70 tax provisions and generally apply to returns filed in 2028, the IRS said. The standard deduction rises to $16,600 for single filers and married individuals filing separately, and the deduction for heads of households will be $24,925.

Rate	Single filers, income over	Married couples filing jointly, income over
12%	$12,800	$25,600
22%	$52,025	$104,050
24%	$109,125	$218,250
32%	$208,325	$416,650
35%	$264,550	$529,100
37%	$661,375	$793,650

Source: IRS. The 10% rate applies to single filers with incomes of $12,800 or less and to joint filers with $25,600 or less.

Credits and exclusions that move with them

The maximum child tax credit for 2027 is $2,300, an increase of $100 from 2026, and the refundable portion may be up to $1,800, also up $100. The maximum earned income tax credit is $8,496 for qualifying taxpayers with three or more qualifying children, up from $8,231 for tax year 2026.

The alternative minimum tax exemption for unmarried individuals is $93,000 and begins to phase out at $515,950. For married couples filing jointly it begins to phase out at $1,031,900.

Estates of decedents who die in 2027 have a basic exclusion amount of $15,480,000, up from $15,000,000 for 2026. The annual exclusion for gifts rises to $20,000 from $19,000.

Limits tied to health and commuting accounts

The limit on voluntary salary reductions for a health flexible spending arrangement rises to $3,500, up $100, and the maximum carryover for plans that allow it is $700, up $20. The monthly limit for the qualified transportation fringe benefit and for qualified parking increases to $350, up $10.

What the indexing leaves untouched

Not every figure moves. Personal exemptions stay at 0, the IRS said, and the income range over which the Lifetime Learning Credit phases out, $80,000 to $90,000 for single filers, has not been adjusted for inflation for tax years beginning after December 31, 2020.

The IRS said taxpayers will continue to benefit from the Working Families Tax Cuts, which it credited for the increases in credits and deductions. The IRS said Revenue Procedure 2026-35 provides details about the adjustments.

A bigger deduction is a modest gain, and the fixed limits are the quiet cost

We think the 2027 numbers are best read as a cost-of-living update rather than a tax cut. By our calculation the joint standard deduction grew 3.1%, from $32,200 to $33,200, and the child tax credit 4.5%, so households whose pay rises faster than that move up the brackets even though the rates themselves have not changed. The Lifetime Learning Credit, whose income range has been frozen since 2020, shows the opposite effect: a limit left alone loses value every year.

The opportunity is that the higher deduction and credits lower the tax owed at a given income. The threat is that anyone near a bracket line, or near a frozen phase-out, can still owe more. We would weigh the 2027 withholding and savings plans against these thresholds, and we expect the 2028 adjustments to track whatever inflation the IRS measures over the coming year, so a faster rise in prices would mean larger thresholds. Evidence of faster wage growth than the indexing would weaken the view that these changes are only a cost-of-living update.

The view in this final section is FinanceInTime's editorial opinion, for information only. It is not investment, tax, legal or other advice, and it does not take your circumstances into account. Forecasts are uncertain and past results do not guarantee future ones.