2026 Tax Brackets Rise 2.3%, Expanded Deductions to Boost Take-Home Pay

The Internal Revenue Service (IRS) has increased 2026 federal tax brackets by approximately 2.3% to offset inflation, maintaining the same tax rate for most taxpayers unless income rises faster than inflation. The One Big Beautiful Bill Act (OBBBA) expanded key deductions and credits, including a retroactive standard deduction boost for 2025 from $750 to $1,500 based on filing status. For 2026, the standard deduction is projected to rise another 2.2% annually with inflation. The OBBBA also enhances the earned income tax credit, state and local tax deduction, and introduces new provisions like tip and overtime deductions. According to the Tax Policy Center, these changes could reduce average middle-income households’ 2026 tax bills by $1,800 and lower-income households by $150. Taxpayers may benefit by adjusting withholding amounts to increase take-home pay throughout the year, as savings from expanded credits are expected to offset any reduction in withholdings, keeping final refunds or balance due similar to 2025. (Updated: January 21, 2026)