IRS raises 2027 standard deduction and child tax credit in its annual inflation adjustments

NEW YORK (AP) — The IRS released its annual inflation adjustments for the 2027 tax year, raising the standard deduction and the child tax credit. These adjustments will apply for tax returns filed in 2028.

Many of the increases, which the IRS released on Nov. 5, are routine and rise each year based on how much prices climbed. For 2027, that increase is about 3.2%. But several of the most popular tax breaks that Republicans included in their 2025 law remain fixed and do not adjust for inflation, meaning they will be worth slightly less each year.

The standard deduction for single filers will increase to $16,600 from $16,100. For married couples filing jointly the standard deduction will rise to $33,200 from $32,200. The standard deduction for heads of household will be $24,925, up from $24,150.

For a married couple earning $100,000 who use the standard deduction, their federal income tax bill would fall to $7,504 from $7,640, according to an Associated Press calculation. A single filer earning $60,000 would see their tax bill drop to $4,952 from $5,020. Those calculations assume the household’s income stays the same. Because these are inflation adjustments, workers whose pay increases with inflation will see their tax bills stay roughly unchanged.

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

The child tax credit will rise by $100 to a maximum of $2,300 per child, and the refundable portion will rise by $100 to $1,800. The 2025 law set the credit at $2,200 and tied future increases to inflation.

Several breaks from the 2025 law are not adjusted for inflation. Workers can still deduct up to $25,000 in tip income and up to $12,500 in overtime pay, or $25,000 for joint filers. People 65 and older will be able to claim an additional $6,000 deduction. All three tax breaks are set to end after the 2028 tax year unless Congress extends them.

The estate tax exclusion, which the 2025 law made permanent at $15 million, will rise with inflation to $15.48 million.

The top income tax rate stays at 37%, and in 2027 it will apply to income above $661,375 for single filers and above $793,650 for married couples filing jointly.