Key takeaways

• Standard deductions, brackets, and savings limits all rise, which may reduce taxes for some taxpayers in 2026.
• Older adults, tipped workers, and some car buyers gain access to new deductions.
• High earners ages 50 and older face new Roth-only rules for catch-up contributions starting in 2026.

Many taxpayers will see higher deductions, higher contribution limits, and new retirement rules in 2026, but they’ll also lose the IRS’s free Direct File option.

The IRS is rolling out a series of updates for the 2026 tax year that will affect how much Americans owe — and how much they are permitted to contribute under IRS rules. Most of the changes reflect inflation adjustments to income brackets, deductions, and credits, but a few will have a bigger impact on take-home pay and planning.

Many of the changes are a result of the One Big Beautiful Bill (OBBB), which was signed into law on July 4. Those who qualify can take advantage of new tax rules when filing federal income tax returns for 2025, which are due on April 15, 2026. From a higher standard deduction to new contribution limits, these tweaks aim to keep pace with rising costs while reshaping how households approach tax season.

1. Standard deduction increases for all filing statuses

The standard deduction is a fixed amount you can subtract from your income to reduce how much of it is taxed. The amount you qualify for depends on your filing status.

For tax year 2026 (which will be filed in 2027), the standard deduction rises to $32,200 for married couples filing jointly. Single taxpayers and married individuals filing separately will see a deduction of $16,100, and heads of household will receive $24,150.¹

For context, the OBBB added an extra 5% to the inflation-adjusted standard deduction for tax year 2025.² The table below shows how the 2025 values changed and how they compare with 2026:

2. Additional deductions increase for older taxpayers

Those 65 or older, or blind, will qualify for a larger standard deduction. For 2026, that means an extra $2,000 for single filers and heads of household, or $1,600 for each qualifying spouse on a joint return (for a total of $3,200 if both qualify). For taxpayers both 65+ and blind, the amount doubles — to $4,000 for an individual or $3,200 per qualifying spouse on a joint return.³

On top of that, the OBBB created a new deduction for older taxpayers effective for 2025 through 2028. If you’re 65 or older at the end of 2025, you may qualify for an additional federal income tax deduction of up to $6,000 if you file an individual return, or up to $12,000 if both spouses are 65 or over and you file jointly. However, this new deduction phases out for taxpayers with modified adjusted gross income over $75,000 ($150,000 for joint filers).⁴

3. New inflation-adjusted tax brackets roll out

Each year, the IRS adjusts the nation’s tax brackets upward to account for the impact of inflation. This also helps to prevent “bracket creep” from nominal wage increases. For tax year 2026, the highest tax rate remains 37% for individual single taxpayers with incomes greater than $640,600 ($768,700 for married couples filing jointly). The other rates are:

 

• 35% for incomes over $256,225 ($512,450 for married couples filing jointly)
• 32% for incomes over $201,775 ($403,550 for married couples filing jointly)
• 24% for incomes over $105,700 ($211,400 for married couples filing jointly)
• 22% for incomes over $50,400 ($100,800 for married couples filing jointly)
• 12% for incomes over $12,400 ($24,800 for married couples filing jointly)

The lowest rate is 10% for single individuals with incomes of $12,400 or less ($24,800 for married couples filing jointly).

4. Contribution limits rise for 401(k)s, IRAs, and HSAs

Contribution limits for popular retirement accounts will also increase in 2026, with the 401(k), 403(b), and government 457 plan limits rising to $24,500. The catch-up contribution for those ages 50 and over has been raised to $8,000 for 401(k)s, bringing the total for those who make the maximum contribution to $32,500.

Meanwhile, the IRA contribution limit will also increase to $7,500 in the new year, with those ages 50 and over able to contribute an additional $1,100 in catch-up contributions.⁵

HSA savers will also see limits rise, with annual limits rising to $4,400 for individuals with self-only coverage on a high-deductible health plan, and $8,750 for those with family coverage.⁶ 

5. Roth-only rule kicks in for catch-up contributions

High-income taxpayers ages 50 or over will see changes to how they can make catch-up contributions beginning January 1, 2026. Individuals who earned more than $150,000 for 2025 can make any catch-up contributions on a Roth basis only — contributing to a pre-tax account will no longer be an option.⁷

6. New deduction for tipped workers

Restaurant servers, bartenders, hotel staff, salon workers, rideshare drivers, and dozens of other service workers that receive tips will be able to deduct up to $25,000 in qualified tips each year from 2025 through 2028. The IRS defines qualified tips as voluntary customer tips reported to your employer or received directly, and the deduction can be claimed whether or not you itemize. The benefit phases out for higher earners, beginning at $150,000 in modified adjusted income (MAGI) ($300,000 for joint filers). Eligibility is based on an IRS-issued list of occupations that regularly receive tips and will be finalized in upcoming regulations.⁸

7. New deduction for car loan interest

Taxpayers who purchased a new vehicle with an auto loan in 2025 may be able to deduct up to $10,000 in interest paid, as long as the car was assembled in the U.S. and weighs under 14,000 pounds. The deduction phases out if the taxpayer’s MAGI exceeds $100,000 ($200,000 for joint filers) and disappears at $150,000 ($250,000 for joint filers). The new deduction is available whether the taxpayer itemizes or takes the standard deduction, but only for tax years 2025 through 2028.⁹

8. IRS Direct File ends after the 2025 tax season

The IRS will discontinue its free Direct File program for 2026. The program enabled eligible taxpayers in 24 states to file their federal taxes free with the IRS. The Treasury Department suggested that the IRS would focus its efforts on its other free programs, including Free File, a partnership with a group of commercial tax software companies.¹⁰