The IRS just raised every federal income tax bracket for 2027. If your paycheck stays exactly the same next year, you’ll owe less tax on it.
That’s not a gift. It’s arithmetic. Each fall the IRS nudges dozens of tax numbers up to match inflation, so rising prices don’t drag you into a higher bracket.
I’ve been a CPA since 1981, and I read these releases every November the way some people read box scores. Most coverage stops at the bracket chart. I’d rather tell you what the numbers mean for your money — and point out the one big number Washington left frozen.
One timing note before we start: these figures apply to money you earn in 2027, on the return you’ll file in early 2028. The return you file next spring still uses the 2026 numbers.
1. Every bracket moved up about 3.2%
The seven tax rates didn’t change: 10%, 12%, 22%, 24%, 32%, 35% and 37%. What changed is where each one starts. According to the IRS announcement, a single filer’s 22% bracket now begins above $52,025 of taxable income, up from $50,400.
For married couples filing jointly, the 22% rate kicks in above $104,050, up from $100,800. The 24% rate starts above $218,250, and the 32% rate above $416,650.
Here’s what that’s worth in real money. Take a single person earning $70,000 in 2026 and the exact same $70,000 in 2027, using the standard deduction. By my math, the 2027 federal income tax bill comes out about $280 lower.
That’s a nice dinner out, courtesy of nobody. But notice the flip side: if your raise beats inflation, part of that raise can still land in a higher bracket. Indexing protects you from inflation, not from success.
2. The standard deduction grew by $500 to $1,000
For 2027, the standard deduction rises to $16,600 for single filers, $33,200 for married couples filing jointly and $24,925 for heads of household. That’s the slice of income the IRS doesn’t tax at all if you don’t itemize.
A $1,000 bigger deduction doesn’t put $1,000 in your pocket. It saves you $1,000 times your top tax rate. For a couple in the 12% bracket, that’s $120. Small, but it’s money you don’t have to do anything to get.
If terms like “adjusted gross income” make your eyes glaze over, we explain them in plain English in 9 Words Every Taxpayer in America Needs to Know.
3. You can sell more stock tax-free
This is the number I’d circle. Long-term capital gains — profits on investments you’ve held more than a year — are taxed at 0%, 15% or 20%, depending on your total taxable income.
For 2027, a married couple can have up to $102,100 of taxable income and still pay 0% on those gains, according to CNBC. For single filers, the line is $51,050. Both thresholds are about 3.2% higher than this year’s.
Here’s how that works in practice. Say a retired couple has $70,000 of taxable income from pensions and IRA withdrawals. They could realize roughly $32,000 of long-term gains in 2027 and owe zero federal income tax on them.
That’s a chance to trim a lopsided stock position, or sell shares and buy them right back to reset your cost basis higher. I’ve been investing for 45 years, and nothing in this market beats a profit the IRS can’t touch.
The catch: other income can crowd your gains out of the 0% zone, and gains can make more of your Social Security taxable. I walk through the first trap in Why Your Regular Retirement Income Is Hiking Your Capital Gains Tax.
If you’d like a professional to run your numbers before you sell, you can find a financial advisor here.
4. There’s more room for a cheap Roth conversion
The 12% bracket is one of the best deals in the tax code, and it just got wider. For 2027 it runs up to $52,025 of taxable income for singles and $104,050 for joint filers — about $3,250 more room for couples than this year.
Why does that matter? If you’re retired and below that line, you can move money from a traditional IRA into a Roth and pay as little as 12% on it.
The extra income can also make more of your Social Security taxable, so run the numbers first. But once it’s in the Roth, the money grows tax-free and comes out tax-free.
Pay 12% now or possibly 22% or more later, when required withdrawals kick in? That’s the whole decision. Many people never look at it until it’s too late.
If you’ve got room left in your 2026 bracket, there’s still time to act this year. Here’s how in Your 2026 Tax Bracket May Have Room to Spare.
Just know that a big conversion can push you over a Medicare income line, as I explain in Cross This Medicare Income Line by $1.
A quick nudge — when it comes to money, the best day to get smart was 20 years ago. The second-best is today. Sign up for the free Money Talks Newsletter and start now. Takes 10 seconds, costs nothing, and could change your retirement.
5. You can give away $20,000 per person, no paperwork
The annual gift tax exclusion rises to $20,000 in 2027, up from $19,000. That’s how much you can give any one person in a year without filing a gift tax return.
It’s per giver, per recipient. A married couple with three grown kids could hand each child $40,000 — $120,000 total — in 2027 without filing a gift tax return, as long as each spouse gives from his or her own money.
The lifetime estate exclusion also rises, to $15.48 million per person. Translation: almost nobody reading this will ever owe federal estate tax.
But estate tax isn’t the only reason to plan. When I served as executor of my parents’ estate, the paperwork mattered far more than any tax. If your will is old or missing, here’s a place to get your estate plan in order.
6. Families get a bigger child credit and FSA
The maximum child tax credit rises to $2,300 per child for 2027, up $100. Up to $1,800 of that is refundable, meaning you can get it even if you owe no tax.
The top earned income tax credit, for working families with three or more kids, rises to $8,496. And health flexible spending accounts get a $3,500 contribution limit, with up to $700 allowed to roll over if your employer permits it.
Speaking of FSAs: if you’ve got money left in yours, don’t let it vanish on Jan. 1. Here are 6 moves to make before Dec. 31.
7. The number that hasn’t budged since 1984
Here’s what the press release doesn’t put in bold. Some tax numbers aren’t adjusted for inflation at all, and the biggest one hits retirees.
Social Security benefits became taxable in 1984. If your “combined income” tops $25,000 as a single filer or $32,000 as a couple, part of your benefit is taxable, according to the Social Security Administration. Those thresholds have never moved.
When the rule took effect, about 8% of beneficiary families owed tax on their benefits. By 2014, the Congressional Budget Office estimated that 49% of beneficiaries paid tax on their benefits, according to an SSA research paper. Same law. Inflation did the rest.
So Congress protects your paycheck from inflation every year, then lets the same inflation pull more of your Social Security into the tax net. I dug into that double standard in Every Social Security Raise Comes With a Tax Hike Nobody Voted On.
Two other numbers stand still. The extra $6,000 deduction for people 65 and older stays at $6,000, and it’s scheduled to disappear after 2028, according to the IRS. And the income limits for the Lifetime Learning Credit haven’t been adjusted since 2020.
What to do now
New brackets mean your employer’s payroll system will likely withhold a little less starting in January. That’s fine if your situation is simple. If you have side income, investment gains or a working spouse, it can leave you short in April 2028.
Spend 15 minutes with the IRS’s free Tax Withholding Estimator early next year. Retired and nobody’s withholding anything? Read this before you get a surprise bill.
Then put the bigger opportunities on your calendar: tax-free gains, a cheap Roth conversion and gifts to family. The IRS just made all three a little more generous. The only way to lose is to ignore them.
