(The Center Square) – Americans can look forward to bigger standard deductions on their 2026 taxes and higher standard deductions on their 2025 taxes, thanks to inflation and the GOP’s One Big Beautiful Bill Act.
On Thursday, the IRS published its annual tax inflation adjustments for more than 60 tax provisions, including the standard deduction, income tax tiers, employer-provided childcare tax credits and others. Many of those adjustments were influenced by the One Big Beautiful Bill, the sweeping legislation passed in July that will advance many of President Donald Trump’s fiscal and policy priorities over the next decade. The bill made permanent tax cuts contained in Trump’s signature Tax Cuts and Jobs Act of 2017, which delivered major tax reforms.
The One Big Beautiful Bill raised the standard tax deduction for married couples from $30,000 to $31,500 for tax year 2025, and for single taxpayers from $15,000 to $15,750. For tax year 2026, the standard deduction will increase to $32,200 for married couples, $16,100 for individuals and $24,150 for heads of household.
It also bumps up the income thresholds for each tax bracket for 2026, while keeping the top tax rate at 37% for the highest earners. The lowest rate is 10% for individual filers making $12,400 or less or married couples making $24,800 or less.
Most Americans fall into the 12% or 22% brackets. Individuals with incomes ranging from $12,401 to $50,399 will pay a 12% income tax. Those making $50,400 to $105,699 will pay a 22% tax. These are up from $11,926 to $48,475 and $48,476 to $103,349 that will pay these rates for tax year 2025.
Employer-provided childcare may become a more common employee benefit, as the OBBB “significantly enhances” this credit for employers, according to an IRS press release. Eligible small businesses can receive an up to $500,000 tax credit for providing childcare services in tax year 2026, up from $150,000.
Alternatively, the OBBB made permanent the elimination of the personal exemption and limits on itemized deductions, although it does limit “the tax benefit from itemized deductions for those taxpayers in the highest tax bracket.”
