Tax Relief: IRS Raises Child Credit and Standard Deduction for 2027

The Internal Revenue Service announced inflation adjustments for the 2027 tax year on Wednesday.

The changes affect the standard deduction, income tax brackets, and several tax credits. Frank J. Bisignano, the IRS director, said working taxpayers will see higher credits and deductions as part of the Tax Cuts and Jobs Act. These changes will appear on tax returns filed in 2028.

The standard deduction for married couples filing jointly will rise to $33,200, an increase of $1,000 from 2026. Single filers will see a deduction of $16,600. Married individuals filing separately will deduct $16,600, while heads of household will deduct $24,925.

The top income tax rate remains at 37%. This rate applies to single filers with income over $661,375 and joint filers with income over $793,650. Other tax rates stay at 35%, 32%, 24%, 22%, 12%, and 10% based on income levels. The maximum child tax credit will increase by $100 to $2,300.

The refundable portion of the child tax credit will also increase by $100 to $1,800. The Earned Income Tax Credit for qualified filers with three or more children will reach $8,496, up from $8,231 in 2026. Employee contributions to health flexible spending accounts will rise to a limit of $3,500. The unused amount that can be carried over will be $700.

The maximum credit for adoption expenses will be $18,250, with up to $5,280 available as a refund. The annual gift tax exclusion will increase from $19,000 to $20,000. Personal exemptions will remain at zero, matching the 2026 level.

The IRS stated these changes cover about 70 tax provisions. The adjustments apply to the 2027 tax year and will impact returns filed in 2028.