Key 2026 Tax Rules & Year-End Actions
The tax landscape for 2027 is heavily shaped by the aftermath of the One Big Beautiful Bill Act (OBBBA), which permanently extended the Tax Cuts and Jobs Act (TCJA) individual rates, and a substantial 3.2% inflation adjustment driven by recent economic shifts.
The projected 3.2% IRS inflation adjustments provide a powerful defense against bracket creep, a phenomenon where a cost-of-living raise inadvertently forces a worker into a higher tax bracket. When inflation drives up the cost of goods, employers often offer raises to help workers maintain their purchasing power. However, if tax brackets remain fixed, those higher wages are taxed at higher marginal rates—effectively punishing workers with a higher tax bill even though their standard of living hasn't actually improved. The projected IRS adjustments for the 2027 tax year prevent this through two primary mechanisms. First, by raising the standard deduction to $33,200 for joint filers and $16,600 for singles, the IRS expands the initial baseline of "tax-free" income. For a single filer, an extra $500 of income is completely shielded from federal taxes compared to 2026. For a married couple, an additional $1,000 is completely excluded from taxation. This adjustment ensures that a portion of your paycheck going strictly toward basic, inflation-impacted living expenses is not taxed. Second, in tandem with the standard deduction, the thresholds for all seven federal tax tiers are projected to increase by roughly 3.2%. Higher income caps mean you keep more money in lower brackets before hitting a higher rate.
As you consider your end-of-year charitable giving, here are a couple of important considerations:
Starting in tax year 2026, taxpayers who take the standard deduction can claim charitable giving tax deductions for donations to qualifying 501(c)(3) public charities of up to $1,000 for single filers or $2,000 for married couples filing jointly. The deduction applies to cash donations only (not property, appreciated stock or other assets). Also, any gifts made to donor-advised funds do not qualify. For those that itemize, there’s now a charitable gift deductibility floor. Starting in 2026, only the portion of charitable gifts that exceed 0.5% of a taxpayer’s Adjusted Gross Income (AGI) is eligible for itemized deduction.
If you’re a couple with an AGI of $300,000, the first $1,500 of charitable donations won’t reduce your taxable income. This change means that you might do better to lump donations into a particular year rather than spread them out. If you are older and taking required minimum distributions (RMDs) from your retirement accounts, you might consider donating by taking a qualified charitable distribution (QCD) from your traditional IRAs. These donations may save you substantially more tax than an itemized deduction for a charitable gift.
Deferred QOF (Qualified Opportunity Fund) capital gains from the original 2017–2021 program must be recognized for tax purposes no later than December 31, 2026, however new tax-saving opportunities from Opportunity Zones will begin in 2027. Opportunity Zones allow investors to gain substantial tax advantages by investing in economically distressed communities. The program was essentially nearing its end, but instead this tax incentive was made permanent via OBBBA. There’s a new 10-year cycle, which will run from January 1st of 2027 through the end of 2036.
TCJA reduced the estimated number of taxpayers that paid AMT from more than 5 million in 2017 to just 200,000 in 2018. The OBBBA is likely to boost that number. Although OBBBA makes bigger exemptions permanent, the law also returns the exemption phaseout thresholds to the lower 2018 levels, beginning in 2026. The AMT phaseout thresholds will be $1 million for joint returns and $500,000 for other taxpayers, adjusted annually for inflation going forward. And the OBBBA doubles the rate at which the exemptions phase out to 50%. As a result, more high-income individuals may be hit with the AMT, starting in 2026. In particular, you could be at risk if you have significant income from capital gains or private activity municipal bond interest, claim a large federal income tax deduction for state and local taxes, or exercise incentive stock options.
As we approach the end of the year, it is critical that you stay in close contact with your financial advisor and your tax professional so you don’t miss out on any planning opportunities that could reduce your 2026 or 2027 tax liabilities.
