On November 5, 2026, the IRS announced the inflation adjustments for tax year 2027 (News Release IR-2026-133 and Revenue Procedure 2026-35). About 70 items change, including the income thresholds in the tax rate schedules, the standard deduction, the child tax credit, and the gift tax exclusions.
These amounts apply to income earned from January through December 2027, reported on returns filed in 2028. Your 2026 return, filed in 2027, still uses the 2026 amounts from Rev. Proc. 2025-32.
This article lays out the main 2027 amounts next to the 2026 figures and highlights the items that matter most to Japanese nationals living in the U.S. and to U.S. citizens and green card holders living in Japan, such as the foreign earned income exclusion and gifts to a spouse who is not a U.S. citizen.
Key takeaways
- The standard deduction rises to $33,200 for married couples filing jointly (up $1,000 from 2026), $16,600 for single filers and married individuals filing separately, and $24,925 for heads of household.
- The seven rates from 10% to 37% stay the same; the income thresholds for each rate go up. The top 37% rate applies to taxable income over $661,375 for single filers and over $793,650 for joint filers.
- The child tax credit is up to $2,300 per child (up $100), and up to $1,800 of it is refundable.
- The foreign earned income exclusion (Form 2555) is $137,300, up from $132,900.
- The annual gift exclusion is $20,000 per recipient, the annual exclusion for gifts to a non-citizen spouse is $201,000, and the estate and gift tax basic exclusion amount is $15,480,000.
2027 standard deduction
The standard deduction is the flat amount you subtract from income if you do not itemize. It goes up for every filing status in 2027.
| Filing status | 2026 | 2027 | Change |
|---|---|---|---|
| Married filing jointly / qualifying surviving spouse | $32,200 | $33,200 | +$1,000 |
| Single | $16,100 | $16,600 | +$500 |
| Married filing separately | $16,100 | $16,600 | +$500 |
| Head of household | $24,150 | $24,925 | +$775 |
| Additional amount for age 65+ or blind (married, per person) | $1,650 | $1,700 | +$50 |
| Additional amount for age 65+ or blind (unmarried, not a surviving spouse) | $2,050 | $2,100 | +$50 |
If someone else can claim you as a dependent, your 2027 standard deduction is limited to the greater of $1,400 or your earned income plus $500 (for 2026: $1,350 or earned income plus $450).
The senior deduction for people 65 and older added by the Working Families Tax Cuts is separate from the additional amounts in this table. See our guide to the senior deduction.
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2027 federal income tax brackets
The table shows the range of taxable income (income after the standard deduction or itemized deductions) taxed at each rate. Each rate applies only to the portion of income that falls within its range.
| Rate | Single | Married filing jointly | Head of household | Married filing separately |
|---|---|---|---|---|
| 10% | $0 to $12,800 | $0 to $25,600 | $0 to $18,250 | $0 to $12,800 |
| 12% | Over $12,800 to $52,025 | Over $25,600 to $104,050 | Over $18,250 to $69,650 | Over $12,800 to $52,025 |
| 22% | Over $52,025 to $109,125 | Over $104,050 to $218,250 | Over $69,650 to $109,100 | Over $52,025 to $109,125 |
| 24% | Over $109,125 to $208,325 | Over $218,250 to $416,650 | Over $109,100 to $208,300 | Over $109,125 to $208,325 |
| 32% | Over $208,325 to $264,550 | Over $416,650 to $529,100 | Over $208,300 to $264,550 | Over $208,325 to $264,550 |
| 35% | Over $264,550 to $661,375 | Over $529,100 to $793,650 | Over $264,550 to $661,350 | Over $264,550 to $396,825 |
| 37% | Over $661,375 | Over $793,650 | Over $661,350 | Over $396,825 |
Compared with 2026 (taxable income where each rate starts)
| Rate | Single 2026 | Single 2027 | Joint 2026 | Joint 2027 |
|---|---|---|---|---|
| 12% | Over $12,400 | Over $12,800 | Over $24,800 | Over $25,600 |
| 22% | Over $50,400 | Over $52,025 | Over $100,800 | Over $104,050 |
| 24% | Over $105,700 | Over $109,125 | Over $211,400 | Over $218,250 |
| 32% | Over $201,775 | Over $208,325 | Over $403,550 | Over $416,650 |
| 35% | Over $256,225 | Over $264,550 | Over $512,450 | Over $529,100 |
| 37% | Over $640,600 | Over $661,375 | Over $768,700 | Over $793,650 |
Examples
Example 1: Married filing jointly, $150,000 in wages, standard deduction
For 2027, taxable income is $150,000 minus the $33,200 standard deduction, or $116,800. That falls in the 22% range (over $104,050 to $218,250), so the tax is $11,974 + ($116,800 − $104,050) × 22% = $14,779.
Using the 2026 amounts with the same wages, taxable income is $117,800 and the tax is $11,600 + ($117,800 − $100,800) × 22% = $15,340. With the same income, the 2027 tax is $561 lower.
Example 2: Single, $80,000 in wages, standard deduction
For 2027, taxable income is $80,000 − $16,600 = $63,400, and the tax is $5,987 + ($63,400 − $52,025) × 22% = $8,489.50. With the 2026 amounts the tax is $8,770, so the 2027 tax is $280.50 lower.
Both examples ignore credits, other deductions, and state tax. Your actual tax depends on your family situation and types of income.
Long-term capital gains and qualified dividends
Long-term capital gains (on assets held more than one year) and qualified dividends are taxed at 0%, 15%, or 20%. The amounts below are the taxable income limits for the 0% and 15% rates; income above the 15% limit is taxed at 20%.
| Filing status | 0% limit (2026 → 2027) | 15% limit (2026 → 2027) |
|---|---|---|
| Married filing jointly / qualifying surviving spouse | $98,900 → $102,100 | $613,700 → $633,600 |
| Single | $49,450 → $51,050 | $545,500 → $563,200 |
| Head of household | $66,200 → $68,350 | $579,600 → $598,400 |
| Married filing separately | $49,450 → $51,050 | $306,850 → $316,800 |
Items that matter most for Japanese expats and Americans in Japan
| Item | 2026 | 2027 |
|---|---|---|
| Foreign earned income exclusion (Form 2555) | $132,900 | $137,300 |
| Annual gift exclusion (per recipient) | $19,000 | $20,000 |
| Annual exclusion for gifts to a spouse who is not a U.S. citizen | $194,000 | $201,000 |
| Estate and gift tax basic exclusion amount | $15,000,000 | $15,480,000 |
| Kiddie tax threshold (unearned income of a child) | $1,350 | $1,400 |
Foreign earned income exclusion: U.S. citizens and green card holders who work outside the U.S., including in Japan, and who meet the requirements can exclude foreign wages and other earned income. The 2027 limit is $137,300.
Gifts to a non-citizen spouse: If your spouse is not a U.S. citizen, gifts to your spouse are not unlimited tax-free. For 2027, the first $201,000 a year is excluded from taxable gifts. See our guide to gifts to a non-citizen spouse.
Basic exclusion amount: The $15,480,000 figure is used not only for the estate tax but also for the gift tax credit and the generation-skipping transfer (GST) tax exemption.
Other notable items
| Item | 2026 | 2027 |
|---|---|---|
| Child tax credit (maximum per child) | $2,200 | $2,300 |
| Refundable portion of the child tax credit (maximum) | $1,700 | $1,800 |
| AMT exemption: unmarried | $90,100 | $93,000 |
| AMT exemption: married filing jointly | $140,200 | $144,700 |
| AMT exemption phaseout begins: unmarried / joint | $500,000 / $1,000,000 | $515,950 / $1,031,900 |
| Earned income tax credit (EITC) maximum: three or more children | $8,231 | $8,496 |
| EITC maximum: no qualifying children | $664 | $685 |
| Adoption credit maximum | $17,670 | $18,250 |
| Health FSA salary reduction limit / carryover limit | $3,400 / $680 | $3,500 / $700 |
| Qualified transportation and parking benefits (monthly) | $340 | $350 |
| Section 179 expensing limit | $2,560,000 | $2,640,000 |
Items not adjusted for inflation
- The personal exemption remains $0 for 2027.
- The income range where the Lifetime Learning Credit phases out is not adjusted: modified AGI of $80,000 to $90,000 ($160,000 to $180,000 for joint returns).
- There is no overall limitation on itemized deductions, but taxpayers in the top 37% bracket face a limit on the tax benefit of itemized deductions.
Your 2026 return and planning for 2027
Your 2026 return, filed in 2027, uses the 2026 amounts. See our 2027 U.S. tax filing guide for deadlines and documents.
The 2027 amounts are a useful guide when you review next year’s paycheck withholding or estimated tax payments (Form 1040-ES). For steps you can still take this year, see the year-end tax planning checklist.
Frequently asked questions
Which return uses the 2027 amounts?
The 2027 return, filed in 2028, covering income from January through December 2027. The 2026 return, filed in 2027, uses the 2026 amounts.
Did the tax rates change?
No. The seven rates (10%, 12%, 22%, 24%, 32%, 35%, and 37%) are unchanged; only the taxable income thresholds for each rate went up.
If my income stays the same, will my tax go down?
With a higher standard deduction and higher bracket thresholds, your federal income tax will be slightly lower if nothing else changes. In the example above, a joint return with $150,000 in wages goes from $15,340 to $14,779.
I am a U.S. citizen living in Japan. What is the 2027 foreign earned income exclusion?
It is $137,300 for 2027, up from $132,900 for 2026.
At CLT NY INC., an IRS Enrolled Agent can help with your 2026 return and with reviewing withholding and estimated tax payments for 2027, in Japanese or English. Contact us.
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Related articles
- U.S. Tax Filing Guide 2027 for Japanese Expats: Tax Year 2026 Deadlines, Documents and How to File
- Gifts to a Spouse Who Is Not a U.S. Citizen: The Annual Exclusion, Form 709, and Joint Property
- The OBBBA Senior Deduction for People 65+: What It Means for Green-Card Holders With Japanese Pensions
- The OBBBA (2025 Tax Law) Explained: What Changed for Japanese Residents of the U.S.
- Year-End U.S. Tax Planning Checklist for Japanese Expats: 12 Things to Do Before December 31
Sources: IRS IR-2026-133 (tax year 2027 inflation adjustments); IRS Rev. Proc. 2026-35 (2027 inflation-adjusted amounts); IRS Rev. Proc. 2025-32 (2026 inflation-adjusted amounts). Information as of November 2026. This article provides general information and is not individual tax advice.
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