IRS raises Child Tax Credit and standard deduction for 2027

IRVINE, Texas. The Internal Revenue Service announced a set of inflation adjustments for the 2027 tax year on Thursday. The updates affect the standard deduction, income tax brackets, and several key tax credits. These changes will appear on tax returns that residents file in 2028.

IRS CEO Frank J. Bisignano stated that hardworking American taxpayers will continue to benefit from the Working Families Tax Cuts. He noted that credits and deductions will increase with this annual adjustment.

Last year, the standard deduction was lower than the new figures. For the 2027 tax year, the standard deduction for married couples filing jointly will be $33,200. This represents an increase of $1,000 from 2026 levels. Single filers and married individuals filing separately will see a standard deduction of $16,600. Heads of household will have a standard deduction of approximately $24,925.

The top federal income tax rate remains at 37%. This rate applies to single taxpayers with income over $661,375. For married couples filing jointly, the threshold for the top rate is $793,650. Other tax brackets will remain at 35%, 32%, 24%, 22%, 12%, and 10% depending on the taxpayer's income level.

Several credits are increasing in value for 2027. The maximum Child Tax Credit will rise to $2,300, up $100 from the previous year. The maximum refundable portion of that credit will also increase by $100 to reach $1,800. The Earned Income Tax Credit maximum for eligible taxpayers with three or more children will jump from $8,231 to $8,496.

Other financial limits are shifting as well. The annual gift tax exclusion will rise from $19,000 to $20,000. Personal exemptions will remain at zero, consistent with 2026. The maximum credit for adoption expenses will increase to $18,250, with up to $5,280 being refundable. Employee contributions to health flexible spending accounts can now go up to $3,500, with a carryover limit of $700.

The IRS described these changes as part of its annual update to nearly 70 tax provisions. All figures cited apply to the 2027 tax year and will be reflected in documents filed during 2028.