A married couple can have $104,050 of taxable income in 2027 and still sit in the 12% bracket. That's $3,250 more than this year. Taxable income is what's left after your deductions. The IRS set the new numbers on Thursday, Nov. 5. Every bracket line goes up about 3.2%. It's the yearly inflation fix the law requires, and it means a little less tax on the same pay.
Here's how the ladder works. The 10% rate covers your first dollars. Each slice above that pays a higher rate than the slice below it. Only the dollars above a line pay that line's rate. For a single filer in 2027, the 12% bracket runs from $12,801 to $52,025. The 22% bracket runs up to $109,125, and the 24% bracket up to $208,325. For a couple filing jointly, 12% runs up to $104,050, 22% up to $218,250 and 24% up to $416,650. The 37% top rate starts above $661,375 for a single filer and $793,650 for a couple. That top line climbed by nearly $25,000 for a couple.
The other numbers that moved
The standard deduction rises to $16,600 for a single filer and $33,200 for a couple. That's the flat amount you subtract before tax. Most people take it rather than adding up their own deductions. The child tax credit goes to $2,300 from $2,200. The cap on the state and local tax deduction gets its own 1% bump, to $40,804, Mark Luscombe of Wolters Kluwer told the Journal. For 2027, one person can shelter $15.48 million from estate tax, up from $15 million for deaths in 2026. The yearly tax-free gift per recipient goes to $20,000 from $19,000. Those gifts don't count against the $15.48 million.
What didn't move
Some lines never adjust. The income levels where Social Security benefits start to be taxed stay put. So do the $200,000 and $250,000 levels where some higher investment-income taxes kick in. The new deductions for tips, overtime, car-loan interest and seniors aren't indexed either, and they're set to end after 2028. One more thing. These numbers are for tax year 2027, the return you'll file in early 2028. The 401(k) and IRA limits for 2027 aren't out yet. The IRS says they'll come later this fall.
Our read
This is a Tax and Estate story, and the useful part is the lines. The Journal's Ashlea Ebeling and Richard Rubin figure the saving at a few hundred dollars for many households. The bigger money is in planning around the lines. Take a Roth conversion. That's moving money from a regular IRA to a Roth and paying the tax now. A retired couple who converts just enough to fill the 12% bracket gets $3,250 more room in 2027. If you give to grandchildren, each gift can be $20,000 starting Jan. 1, 2027. Gifts made before then use this year's $19,000.
Now the part that touches your own plan. Find the taxable income on last year's return and set it next to the 2027 lines, $52,025 single or $104,050 joint for the top of the 12% bracket. The gap between the two is a first clue to how much room you'd have for a Roth conversion or a bigger IRA withdrawal next year. Retirees, check the Social Security line too. It doesn't move, so a raise or a conversion can push more of your benefit into taxable income. A tax plan is a lot like a winter coat. You want it sized before the cold arrives. If you'd like a second set of eyes on your numbers, that's what a planning review is for.