IRS tax bracket breakdown: Income categories, capital gains and other details

The IRS on Thursday announced changes to the income tax brackets for tax year 2026. The income thresholds of all slabs have been increased.

The Internal Revenue Service (IRS) announced the new federal income tax brackets on Thursday. In what would please many taxpayers, the income thresholds of all tax brackets have been increased. The highest slab – 37% – now applies to people with a taxable income above $640,000 and couples making north of $768,700 in taxed earnings.

IRS tax bracket breakdown: Income categories, changes in capital gains explained for US taxpayers(REUTERS)

These changes would apply for the year 2026, for which returns would be filed in 2027. The changes take into account inflation and its effects.

These modifications come at a time when the government shutdown is set to affect the manpower currently available to the IRS. In fact, the agency had declared on the previous day that it would furlough around half its workforce due to the shutdown.

Apart from changes in tax slabs, there are also alterations made in other areas. Long-term capital gains brackets have also been modified, apart from changes to the estate tax exemption, child tax credit eligibility norms, earned income tax credits and other provisions.

Breakdown of IRS tax brackets

The lowest tax slab – 10% – would now apply to single filers with a taxable income of up to $12,400 and married couples making $24,800. Overall, there are seven tax slabs. Here are the other categories:

12% for incomes over $12,400 ($24,800 for married couples filing jointly)

22% for incomes over $50,400 ($100,800 for married couples filing jointly)

24% for incomes over $105,700 ($211,400 for married couples filing jointly)

32% for incomes over $201,775 ($403,550 for married couples filing jointly)

35% for incomes over $256,225 ($512,450 for married couples filing jointly)

37% for incomes greater than $640,600 ($768,700 for married couples filing jointly)

https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill

Change in standard deductions

Apart from changes in income tax brackets, standard deductions have also been revised. As per News Nation, for each filing status, the standard deductions have been increased by 2.2% over the previous year.

For single filers, the standard deduction now stands at $16,100, and for married couples filing jointly, it comes to $32,200. For the head of household category, it is up to $24,150.

Standard deductions are the amount that can be deducted from one’s gross income to determine taxable income. So, the raising of the income thresholds of tax brackets and increases in standard deductions ensure that Americans will have a little more money in hand.

Change in capital gains tax brackets

The IRS also announced changes in the brackets for capital gains taxes. According to CNBC, these apply to assets owned for more than a year by taxpayers. In this area, the upper limit has been increased for various slabs.

Single filers earning up to $49,450 and married couples making as much as $98,900 qualify for no long-term capital gains taxes.

FAQs

What are income tax brackets?

Income tax brackets are the divisions of taxpayers, depending upon their taxable income, based on which the tax rate is applied. The higher the taxable income, the higher is the tax imposed.

For which period will the changed tax rates apply?

The changes are meant to come into force for the tax year 2026, and would apply to returns filed in 2027.

What are standard deductions?

Standard deductions are the amounts that are deducted from gross income to determine taxable income.