IRS 2027 Tax Brackets: Deductions Rise and SALT Cap Increases

By Amara Osei

The IRS will raise 2027 federal income-tax brackets by about 3.2%, while lifting the standard deduction by an extra $500 to $16,600 for individuals and $1,000 to $33,200 for married couples. That follows a 2% bracket adjustment for taxes paid this year, according to the agency.

MarketWatch said the indexing has operated for decades and protected households from "stumbling too easily into higher tax rates." The IRS indexes tax brackets, the standard deduction and approximately 70 other provisions to annual inflation adjustments. IRS figures show the 3.2% adjustment is far smaller than the 7% increase that followed 2022's white-hot inflation.

The IRS announced the changes Thursday, days after the midterm elections. MarketWatch framed the announcement as a reminder of higher energy costs' far-reaching impact in America's standoff with Iran. MarketWatch also reported that high gas and rising retail prices weighed heavily on voters who ousted Republican incumbents across the country.

MarketWatch said 2027 marks the second full year under the new Republican tax law. The 2025 law prevented tax rates from rising and increased the standard deduction. The law also created a senior bonus and made the child tax credit inflation-indexed, according to MarketWatch.

The IRS set the child tax credit at $2,300 per eligible child for 2027, up from the $2,200 maximum under the law. In a separate announcement last month, the Social Security Administration said 2027 monthly payments would receive a 3.6% cost-of-living increase, up from a 2.8% increase for 2026.

When do the new rates take effect?

The IRS says the new brackets apply to returns Americans file in 2028 for 2027 income. MarketWatch said taxpayers still have time to use the bands for tax planning.

Most households do not fall into a single tax bracket, according to MarketWatch. The IRS set seven rates, ranging from 10% to 37%, and portions of taxable income can face several progressively steeper bands.

What do single filers pay?

The IRS set these 2027 brackets for single filers. Each threshold separates one marginal rate from the next.

• 10%: Taxable income not over $12,800; tax is 10% of the income.
• 12%: Taxable income over $12,800 up to $52,025; tax is $1,280 plus 12% above $12,800.
• 22%: Taxable income over $52,025 up to $109,125; tax is $5,987 plus 22% above $52,025.
• 24%: Taxable income over $109,125 up to $208,325; tax is $18,549 plus 24% above $109,125.
• 32%: Taxable income over $208,325 up to $264,550; tax is $42,357 plus 32% above $208,325.
• 35%: Taxable income over $264,550 up to $661,375; tax is $60,349 plus 35% above $264,550.
• 37%: Taxable income over $661,375; tax is $199,237.75 plus 37% above $661,375.

What do married couples pay?

The IRS set these 2027 brackets for married couples filing jointly. Each threshold separates one marginal rate from the next.

• 10%: Taxable income not over $25,600; tax is 10% of the income.
• 12%: Taxable income over $25,600 up to $104,050; tax is $2,560 plus 12% above $25,600.
• 22%: Taxable income over $104,050 up to $218,250; tax is $11,974 plus 22% above $104,050.
• 24%: Taxable income over $218,250 up to $416,650; tax is $37,098 plus 24% above $218,250.
• 32%: Taxable income over $416,650 up to $529,100; tax is $84,714 plus 32% above $416,650.
• 35%: Taxable income over $529,100 up to $793,650; tax is $120,698 plus 35% above $529,100.
• 37%: Taxable income over $793,650; tax is $213,290.50 plus 37% above $793,650.

What do heads of household pay?

The IRS set these 2027 brackets for heads of household. Each threshold separates one marginal rate from the next.

• 10%: Taxable income not over $18,250; tax is 10% of the income.
• 12%: Taxable income over $18,250 up to $69,650; tax is $1,825 plus 12% above $18,250.
• 22%: Taxable income over $69,650 up to $109,100; tax is $7,993 plus 22% above $69,650.
• 24%: Taxable income over $109,100 up to $208,300; tax is $16,672 plus 24% above $109,100.
• 32%: Taxable income over $208,300 up to $264,550; tax is $40,480 plus 32% above $208,300.
• 35%: Taxable income over $264,550 up to $661,350; tax is $58,480 plus 35% above $264,550.
• 37%: Taxable income over $661,350; tax is $197,360 plus 37% above $661,350.

What changes for older taxpayers?

The IRS set the supplemental standard deduction at an extra $2,100 for single taxpayers age 65 and up. The agency set the extra amount at $1,700 per person for married filers.

MarketWatch said the separate $6,000 senior bonus came through the 2025 tax law. The bonus can be worth up to $12,000 for married couples. MarketWatch said the full deduction is available to individuals with modified adjusted gross income below $75,000, or $150,000 for joint filers.

How much can taxpayers deduct for state and local taxes?

The 2025 tax law lets households deduct up to four times as much for state income and local property taxes, according to MarketWatch. MarketWatch said the maximum rose to $40,000 from $10,000, with lawmakers writing in 1% annual increases for 2026 through 2029 rather than direct inflation indexing.

The maximum SALT deduction is $40,400 for 2026, and the full deduction begins to phase out after incomes hit $505,000. The IRS set the 2027 cap at $40,804 and the full-deduction income limit at $510,050.

What else could change?

The IRS said more inflation-linked provisions are still coming, including rules on contribution limits for 401(k)s and IRAs. MarketWatch said taxpayers can use the published brackets for 2027 planning while waiting for the IRS to issue the additional retirement-contribution limits.