From soaring gas prices to rising grocery store receipts, we’ve all been feeling the strain on our wallets lately.
But some taxpayers in Chicago could be in for a bit of relief over the course of next year.
On Thursday, November 5, the Internal Revenue Service (IRS) released its annual inflation adjustments for the 2027 tax year, detailing changes to numerous key tax provisions.
Here’s a breakdown of the changes and what they mean for you.
IRS introducing changes to standard deductions, child tax credit, and more
The IRS’s 2027 inflation adjustments will impact nearly 70 federal tax rules and benefits, according to a release.
Key adjustments include increases to standard deductions and the child tax credit, as well as changes to estate and gift tax exemptions.
Standard deductions increasing
Perhaps the broadest change impacting taxpayers in 2027 is an increase to standard deductions across filing categories.
The standard deduction for married couples filing jointly will increase to $33,200 in tax year 2027, up $1,000 from 2026.
Single taxpayers and married individuals filing separately will see a deduction increase to $16,600. The standard deduction for heads of household will be $24,925.
Child tax credit increase
The child tax credit is a federal tax benefit that helps qualifying families offset the cost of raising children. Eligible families can claim a credit for qualifying children, thus reducing the amount of federal income tax they owe.
The maximum amount of the child tax credit will increase to $2,300 for 2027. This marks an increase of $100 from 2026.
For 2027, the IRS is also adjusting the amount of potential refundable credit to $1,800, up $100 from 2026.
Increases to gift tax exclusion, estate tax exemption
Additionally, the IRS is making adjustments to the federal estate tax exemption and gift tax exclusions for 2027.
The estate tax exclusion is the amount of a deceased person’s estate that can be transferred to heirs without being subject to federal estate taxes.
For 2027, the estate tax exclusion will rise from $15 million to $15.48 million.
The annual exclusion for gifts will also increase to $20,000, up from $19,000 in tax year 2026. This figure represents the amount of money someone can gift to one person in a single year without it counting against their lifetime federal gift or estate tax exemption.
When do these tax changes go into effect?
Here’s the part that’s a little confusing—these tax changes won’t apply to your upcoming 2026 return that you’ll file in early 2027.
These changes apply to the 2027 tax year, meaning you’ll see them reflected on your 2027 return which you’ll file in 2028.
So right now the impact of these changes won’t be very noticeable; rather, they’re just something to be aware of over the coming year as you track your earnings and undergo any major life changes.
For a full breakdown of the 2027 annual inflation adjustments, visit the IRS site.
