Introduction
Updated U.S. brackets and deductions change how much tax you owe and what you should withhold. The IRS has set new income thresholds and deduction amounts for tax year 2026. Most taxpayers will file those returns in 2027.
Those figures come from the IRS inflation announcement of 9 October 2025, which applies Revenue Procedure 2025-32.
This guide covers U.S. federal individual income tax only, including the 2026 brackets and standard deductions. It is most useful for readers in Australia who earn U.S. income, run U.S.-connected businesses, or have U.S. filing obligations.
Australian tax rules, plus U.S. state and local taxes, are separate and not covered here. All amounts are in U.S. dollars.
Key Takeaways
- Seven rates (10% to 37%) remain, with new 2026 income thresholds for each filing status.
- Brackets are progressive: only income inside a bracket is taxed at that rate.
- Standard deductions are $16,100 (single), $32,200 (joint) and $24,150 (head of household).
- The $6,000 senior deduction has its own age, income and filing rules.
2026 Federal Income Tax Brackets by Filing Status
The table shows the top of each bracket, based on taxable income, not gross income. Each rate applies above the previous row's figure up to the listed amount. The 10% bracket starts at zero.
| Rate | Single | Married filing jointly / QSS | Married filing separately | Head of household |
|---|---|---|---|---|
| 10% | $12,400 | $24,800 | $12,400 | $17,700 |
| 12% | $50,400 | $100,800 | $50,400 | $67,450 |
| 22% | $105,700 | $211,400 | $105,700 | $105,700 |
| 24% | $201,750 | $403,550 | $201,775 | $201,750 |
| 32% | $256,200 | $512,450 | $256,225 | $256,200 |
| 35% | $640,600 | $768,700 | $384,350 | $640,600 |
| 37% | Over $640,600 | Over $768,700 | Over $384,350 | Over $640,600 |
Source: Rev. Proc. 2025-32, section 4.01.
Filing status changes bracket widths, the 37% threshold, and your standard deduction. Joint brackets are not always double the single ones. The joint 37% threshold, for example, is not twice the single figure.
Filing-status considerations
- Single: unmarried at year end.
- Married filing jointly: spouses combine income and deductions on one return.
- Married filing separately: each spouse files their own return.
- Head of household: unmarried and supporting a qualifying person.
- Qualifying surviving spouse: uses joint brackets in limited cases after a spouse's death.
Check the IRS eligibility rules for each before choosing.
Australia-based taxpayers should settle residency, treaty, income-sourcing and filing-status questions first. If you file as a nonresident alien, different rules apply:
- File Form 1040-NR; married filing jointly and head of household are not available
- The standard deduction is generally unavailable
- Not all U.S.-source income is taxed under this ordinary bracket table
How 2026 Tax Brackets Work
The calculation in order
- Gross income: all income not exempt from tax.
- Adjusted gross income (AGI): gross income minus specified adjustments.
- Taxable income: AGI minus the standard or itemised deduction.
- Tax before credits: bracket rates applied to taxable income.
- Credits: subtracted from the tax itself, after the bracket calculation.
The marginal rate is the rate on your last dollar of taxable income. The effective rate is total tax divided by total income. The two usually differ because lower layers of income are taxed at lower rates.
Hypothetical example
This is an illustration only. A single filer has $100,000 of taxable income in 2026:
- First $12,400 at 10% = $1,240
- Next $38,000 (to $50,400) at 12% = $4,560
- Remaining $49,600 (to $100,000) at 22% = $10,912
Total tax is $16,712. The marginal rate is 22%, but the effective rate on taxable income is about 16.7%. Reaching the 22% bracket does not put all $100,000 at 22%.
Deductions versus credits
Deductions shrink the income that is taxed. Credits reduce the tax bill directly. A deduction's value depends on your bracket, while a credit's value is the same for everyone who qualifies.
What changed for 2026
Two things are easy to confuse. The seven-rate schedule was made permanent by P.L. 119-21, enacted 4 July 2025, which is a legislative change. The dollar thresholds in the table above are the annual inflation adjustments under Rev. Proc. 2025-32.
2026 Standard Deduction Rules
The standard deduction is a fixed dollar amount that reduces taxable income. It is not a rate.
| Filing status | 2025 | 2026 |
|---|---|---|
| Single | $15,750 | $16,100 |
| Married filing jointly / QSS | $31,500 | $32,200 |
| Married filing separately | $15,750 | $16,100 |
| Head of household | $23,625 | $24,150 |
The 2025 figures reflect the enhanced amounts under the 2025 law. A $16,100 deduction saves a filer in the 22% bracket about $3,542, but a filer in the 12% bracket only about $1,932.
Standard deduction versus itemised deductions
Most taxpayers choose either the standard deduction or itemised deductions. Itemising can pay off when you have significant state and local taxes, mortgage interest, charitable gifts or large medical costs.
Compare them in three steps:
- Estimate your eligible itemised deductions.
- Compare the total with the standard deduction for your filing status.
- Apply the limits that can reduce itemised amounts.
For 2026, the main limits are:
- State and local tax cap of $40,400 ($20,200 if married filing separately), reduced for MAGI above $505,000.
- Mortgage interest on up to $750,000 of acquisition debt.
- Medical expenses only above 7.5% of AGI.
- A new 0.5% floor on charitable contributions for itemisers.
- A 2/37 reduction of itemised deductions for those in the 37% bracket.
Senior and additional deduction rules
Age or blindness addition. This increases the standard deduction by $1,650 per condition for married taxpayers, or $2,050 for unmarried taxpayers. A married couple where both spouses are over 65 gets two additions.
The $6,000 senior deduction. This is a separate deduction, available for 2025 to 2028. The main rules:
- You must be 65 or older by the last day of the tax year.
- Maximum is $6,000 per eligible person, or $12,000 if both spouses qualify.
- It is available whether you itemise or not.
- It phases out at 6% of MAGI above $75,000 (single, head of household) or $150,000 (joint).
- A valid Social Security number is required.
- Married taxpayers must file jointly. Married filing separately is excluded.
Check IRS senior deduction guidance before claiming.
Common complications:
- Dependants: the standard deduction is generally limited to the greater of $1,350 or earned income plus $450.
- Married filing separately: it is zero if your spouse itemises.
- Nonresident and dual-status aliens generally cannot claim the standard deduction, though nonresidents can claim the senior deduction through Schedule 1-A on Form 1040-NR.
Other Rules That Can Affect the Final Tax Bill
Capital gains
Long-term capital gains use their own thresholds, not the ordinary table. When people ask about the "top of the 20% bracket," this is the table they need. The 20% rate has no upper limit; it starts where the 15% rate ends.
| Filing status | 0% through | 15% through | 20% above |
|---|---|---|---|
| Single | $49,450 | $545,500 | $545,500 |
| Married filing jointly / QSS | $98,900 | $613,700 | $613,700 |
| Married filing separately | $49,450 | $306,850 | $306,850 |
| Head of household | $66,200 | $579,600 | $579,600 |
Alternative minimum tax
The AMT is a separate calculation that can affect higher earners. 2026 exemption amounts are:
- Single or head of household: $90,100
- Married filing jointly: $140,200
- Married filing separately: $70,100
Phaseout begins at $500,000 of alternative minimum taxable income ($1,000,000 joint).
What the bracket table does not settle
Several items sit outside the ordinary bracket table:
- Tax credits and payroll taxes
- Self-employment tax
- State and local taxes
- Corporate taxes and pass-through business deductions
- Foreign tax rules and treaty provisions, including the U.S.-Australia treaty
2026 Tax Planning Checklist
Work through these steps in order:
- Identify your filing status so the right brackets and deduction amounts apply.
- Estimate total income from wages, investments and other reportable sources.
- Calculate taxable income after deductions.
- Compare standard and itemised deductions, then use the higher amount.
- Review credits that can reduce tax after liability is calculated.
- Check withholding or estimated payments against what you expect to owe.
Planning areas to review
| Arrangement | 2026 limit | Catch-up |
|---|---|---|
| 401(k) deferrals | $24,500 | $8,000 at 50+; $11,250 at 60-63 |
| IRA | $7,500 | $1,100 at 50+ |
| HSA, self-only | $4,400 | $1,000 at 55+ |
| HSA, family | $8,750 | $1,000 at 55+ |
These are contribution limits. Deductibility and eligibility depend on your circumstances, and cross-border taxpayers may not qualify for every arrangement. Charitable giving and income timing are also worth reviewing; none of these steps guarantees a lower bill.
Estimated tax matters too. You generally need quarterly payments (Form 1040-ES, or 1040-ES (NR) for nonresidents) if you expect to owe $1,000 or more after withholding. A safe harbour is paying 90% of 2026 tax or 100% of 2025 tax. Use 110% of 2025 tax if your 2025 AGI exceeded $150,000.
Support for Australia-based owners
VJM Global supports Australian business owners with U.S. filing obligations through cross-border accounting, tax compliance and financial reporting. Its team includes U.S.-trained CPAs and Indian Chartered Accountants, and it prepares Form 1040 and 1040-NR returns. Individual tax advice still requires review by a qualified professional.
Frequently Asked Questions
What are the changes to the IRS tax brackets in 2026?
The seven rates (10% to 37%) stay the same, while dollar thresholds rise with inflation indexing. Legislation made the rate structure permanent. These figures apply to tax year 2026, with returns filed in 2027.
Where are the married filing jointly tax brackets?
Use the married filing jointly column in the table above. The 10% rate runs through $24,800 and 37% applies above $768,700, based on joint taxable income.
What is the top of the 20% tax bracket?
This usually refers to long-term capital gains, and the 20% rate has no upper limit. It starts above $545,500 (single) and $613,700 (joint).
What is the current standard deduction rate?
It is an amount, not a rate. For 2026 it is $16,100 (single or separate), $32,200 (joint) and $24,150 (head of household).
Who qualifies for the standard deduction?
Most U.S. resident filers who do not itemise qualify. Nonresident and dual-status aliens generally cannot claim it, and dependants and separate filers face limits.
What is the $6,000 senior deduction and who is eligible for it?
It is for taxpayers 65 or older, for 2025 to 2028, with a valid SSN. It phases out above $75,000 MAGI ($150,000 joint), requires joint filing if married, and can be claimed with either the standard or itemised deduction.
