IRS announces increase in Child Tax Credit and deductions for 2027

Inflation adjustments will benefit taxpayers when they file their 2028 returns: the standard deduction for married couples filing jointly will rise to $33,200, and the Child Tax Credit will increase to $2,300.

The Internal Revenue Service (IRS) announced new inflation adjustments for the 2027 tax year, including changes to the standard deduction, income tax brackets and several tax credits.

“Hardworking American taxpayers will continue to benefit from the Working Families Tax Cuts (WFTC) and will see WFTC credits and deductions increase with this adjustment,” IRS CEO Frank J. Bisignano said.

The changes will generally be reflected in tax returns filed in 2028.

For the 2027 tax year, the standard deduction will be $33,200 for married couples filing jointly, an increase of $1,000 from 2026. The standard deduction will be $16,600 for single filers and married individuals filing separately, and approximately $24,925 for heads of household.

The top tax rate will remain 37% and will apply to single taxpayers with income exceeding $661,375 and married couples filing jointly with income exceeding $793,650. The other tax rates will be 35%, 32%, 24%, 22%, 12% and 10%, depending on income level.

The Child Tax Credit will also increase. For 2027, the maximum credit will be $2,300, up $100 from 2026.

The maximum refundable portion of the credit will be $1,800, also an increase of $100 from the previous year.

Announced changes

The Earned Income Tax Credit (EITC) will have a maximum of $8,496 for eligible taxpayers with three or more children, up from $8,231 in 2026.

The limit on employee contributions to health flexible spending accounts will increase to $3,500, while the maximum amount that can be carried over unused will be $700.

The maximum allowable credit for adoption expenses will rise to $18,250, of which up to $5,280 may be refundable.

The annual gift tax exclusion will increase from $19,000 to $20,000 in 2027. Meanwhile, personal exemptions will remain at zero, as they did in 2026.

The IRS said these changes are part of its annual inflation adjustments to nearly 70 tax provisions. The changes for the 2027 tax year will apply to returns filed in 2028.