IRS sets 2027 tax parameters, raising Child Tax Credit to $2,300

The Internal Revenue Service released its annual inflation adjustments for the 2027 tax year on Thursday. The update increases key thresholds for deductions and credits, including a hike in the maximum Child Tax Credit.

IRS CEO Frank J. Bisignano stated that the adjustments ensure hardworking American taxpayers continue to benefit from the Working Families Tax Cuts. He noted that these specific credits and deductions will increase with the new figures. The agency clarified that these changes apply to tax years ending in 2027, meaning most taxpayers will see the new numbers when they file their returns in 2028.

The standard deduction for married couples filing jointly will rise to $33,200, a $1,000 increase from the 2026 figure. Single filers and those married but filing separately will see a standard deduction of $16,600. For heads of household, the deduction is set at approximately $24,925. Personal exemptions remain at zero, consistent with the previous year.

The top marginal tax rate stays at 37%. This rate applies to single taxpayers with income above $661,375 and married couples filing jointly with income exceeding $793,650. Other tax brackets remain at 35%, 32%, 24%, 22%, 12%, and 10%, adjusted according to income levels.

The maximum Child Tax Credit for 2027 will be $2,300, up $100 from the 2026 limit. The refundable portion of this credit also increases by $100 to a maximum of $1,800. The Earned Income Tax Credit for eligible taxpayers with three or more children will reach $8,496, an increase from $8,231 in 2026.

Other adjustments include an increase in the annual gift tax exclusion from $19,000 to $20,000. The limit on employee contributions to health flexible spending accounts will rise to $3,500, with a carryover limit for unused amounts set at $700. The maximum credit for adoption expenses will reach $18,250, of which up to $5,280 can be refundable.

The IRS described these updates as part of its routine review of nearly 70 tax provisions for inflation. The agency confirmed that all listed figures are final for the 2027 tax year.