IRS boosts tax credits and deductions for 2027

The Internal Revenue Service has released the inflation adjustments for the 2027 tax year, increasing key deductions and credits.

These changes apply to returns filed in 2028. The agency announced the updates on Nov. 5. Most figures rise by approximately 3.2% to match the increase in prices.

For single filers, the standard deduction climbs to $16,600 from $16,100. Married couples filing jointly will see their standard deduction rise to $33,200 from $32,200. Heads of household will receive a standard deduction of $24,925, up from $24,150.

The child tax credit increases by $100 per child, reaching a maximum of $2,300. The refundable portion of that credit also rises by $100 to $1,800. The 2025 tax law set the baseline at $2,200 and linked future growth to inflation.

The maximum earned income tax credit for a worker with no children goes up to $685 from $664. For a family with two children, the maximum credit increases to $7,552 from $7,316.

Several popular tax breaks from the 2025 law do not adjust for inflation. Workers can still deduct up to $25,000 in tip income and up to $12,500 in overtime pay. Joint filers can deduct $25,000 in overtime. Taxpayers aged 65 and older can claim an additional $6,000 deduction. These three breaks are scheduled to expire after the 2028 tax year unless Congress acts.

The estate tax exclusion, made permanent at $15 million by the 2025 law, rises to $15.48 million. The top income tax rate remains at 37%. In 2027, that rate applies to income above $661,375 for single filers and above $793,650 for married couples filing jointly.