IRS 2026 Inflation Adjustments: What High Earners Need to Know

The short answer: for 2026, the IRS raised most income tax thresholds for inflation, but the changes that matter most to high earners and business owners came from the July 2025 tax law. The estate and gift exclusion jumped to $15 million per person, the Section 179 limit is now $2,560,000, and the alternative minimum tax (AMT) exemption starts phasing out at a much lower income than it did in 2025. That last change means more high earners should run an AMT check in their 2026 planning.

The IRS announced these figures on October 9, 2025, in news release IR-2025-103, with the full details in Revenue Procedure 2025-32. Below are the numbers we think matter most for business owners and high-income families, and what to do with them.

Income tax brackets for 2026

The seven rates (10% through 37%) stay the same; the July 2025 law made them permanent. The income ranges moved up for inflation. Here are the top four brackets for 2026 taxable income:

Heads of household reach the 37% bracket at the same $640,600 as single filers. Married couples filing separately reach it above $384,350.

Long-term capital gains and qualified dividends have their own brackets. For 2026, the 0% rate applies up to $98,900 of taxable income for joint filers ($49,450 single), and the 15% rate applies up to $613,700 for joint filers ($545,500 single). Above those amounts, the 20% rate applies. These are federal numbers; Oklahoma income tax is figured separately.

Standard deduction

The standard deduction for 2026 is:

• $32,200 for married couples filing jointly (up from $31,500 for 2025)
• $16,100 for single filers and married filing separately (up from $15,750)
• $24,150 for heads of household (up from $23,625)

The additional standard deduction for taxpayers who are 65 or older or blind is $1,650, or $2,050 if unmarried. Many high earners itemize instead, but the higher standard deduction is one reason a strategy like bunching charitable gifts can still pay off.

The AMT change high earners should notice

The alternative minimum tax is a parallel tax system. You figure your tax both ways and pay the higher amount. An exemption keeps most people out of it, but that exemption phases out as income rises.

For 2026, the AMT exemption is $140,200 for joint filers and $90,100 for single filers, slightly higher than 2025. The bigger news is where the phaseout starts:

• Joint filers: the exemption begins to phase out at $1,000,000 and is gone at $1,280,400. In 2025, the phaseout started at $1,252,700 and ended at $1,800,700.
• Single filers: the phaseout begins at $500,000 and the exemption is gone at $680,200. In 2025, it started at $626,350.

Revenue Procedure 2025-32 notes that the $1,000,000 phaseout amount for joint filers isn’t adjusted for inflation until 2027. The 28% AMT rate applies above $244,500 of AMT income after the exemption ($122,250 if married filing separately).

What it means: if your income is around $1 million or more, the AMT deserves a fresh look for 2026, especially in a year with large state tax deductions, incentive stock option exercises, or other items the AMT treats differently.

Estate and gift tax: $15 million per person

For people who die in 2026, the basic exclusion amount is $15,000,000, up from $13,990,000 for 2025. The same amount applies to lifetime gifts, and the generation-skipping transfer exemption is also $15,000,000 for 2026. The July 2025 law set this amount and provides that it will be adjusted for inflation starting in 2027.

A few related numbers for 2026:

• Annual gift exclusion: $19,000 per recipient, the same as 2025. Gifts within this amount don’t use any of your lifetime exclusion.
• Gifts to a spouse who is not a U.S. citizen: the annual exclusion is $194,000.
• Special use valuation for farms and family businesses (Section 2032A): electing it can reduce the estate value of qualifying real property by up to $1,460,000. This one matters to many Oklahoma farm and ranch families.

Business owners whose companies are growing should know that a higher exclusion doesn’t remove the value of planning early. Gifting assets before they grow can keep that growth out of the estate. Our guide to lifetime gifts and SLATs explains how.

Business numbers: Section 179, QBI, and more

Section 179 expensing. For tax years beginning in 2026, a business can expense up to $2,560,000 of qualifying property. The limit is reduced dollar for dollar once more than $4,090,000 of Section 179 property is placed in service during the year. The Section 179 amount for a sport utility vehicle is capped at $32,000. See our guide to Section 179 and bonus depreciation for how the two work together.

Qualified business income (QBI) deduction. The 20% deduction for owners of pass-through businesses starts to be limited above these 2026 taxable income thresholds:

• $403,500 for joint filers, with the limits fully phased in at $553,500
• $201,750 for most other filers, fully phased in at $276,750

Above the threshold, the wage and property limits start to apply, and specified service businesses (such as medical, legal, and consulting practices) begin to lose the deduction. Starting in 2026, there is also a minimum deduction of $400 for owners with at least $1,000 of qualified business income from businesses they materially participate in. Our QBI deduction guide walks through the rules.

Other business thresholds for 2026:

• Excess business losses: business losses above $256,000 ($512,000 for joint returns) can’t offset other income this year and carry forward instead.
• Cash method gross receipts test: corporations and partnerships with average annual gross receipts of $32,000,000 or less over the prior three years generally can use the cash method.

Retirement plan limits

Retirement limits come from a separate IRS notice. For 2026, the 401(k) employee deferral limit is $24,500, and total contributions to a defined contribution plan can reach $72,000 before catch-up contributions. If you’re 50 or older and earned over $150,000 in wages from your employer in 2025, your catch-up contributions to that employer’s plan generally must be Roth starting in 2026, under a new SECURE 2.0 rule. Our Solo 401(k) guide covers the 2026 limits for business owners.

What to do with these numbers

• Project your 2026 taxable income and see which bracket you land in, both for ordinary income and for capital gains.
• Run an AMT check if your income is near or above the new phaseout range.
• Compare your taxable income with the QBI threshold, since owner salary, retirement contributions, and timing can move you above or below it.
• Review your estate plan against the $15 million exclusion, and use the $19,000 annual exclusion for gifts you already plan to make.
• Time equipment purchases knowing the 2026 Section 179 limit and phaseout.

How we help

At Cannon & Brown Tax Advisors, we build these numbers into a year-round tax plan. Our technology keeps your projections current, so we can test more options against your real numbers, and your tax strategist reviews every recommendation. If you’d like to see how the 2026 figures affect you, start with a free tax analysis.

This article is educational and is not tax advice for your situation. Tax law may change, which may change these rules and numbers.

Sources

• IRS: IRS releases tax inflation adjustments for tax year 2026, including amendments from the One, Big, Beautiful Bill (IR-2025-103)
• IRS: Revenue Procedure 2025-32
• IRS: Revenue Procedure 2024-40 (2025 amounts)
• IRS: Notice 2025-67, 2026 amounts relating to retirement plans and IRAs