Between rent, groceries, and the ever-growing cost of living, finding a little extra room in the budget is always welcome. And while taxes might not exactly be the most exciting thing on anyone’s calendar, the IRS has just announced a series of changes for 2027 that could make a difference for millions of Americans.
On Thursday, November 5, the Internal Revenue Service (IRS) released its annual inflation adjustments for the 2027 tax year, covering nearly 70 tax provisions. Among the updates are a larger Child Tax Credit, higher standard deductions, an increased Earned Income Tax Credit, and changes to estate and gift tax exemptions.
Several other benefits are also getting a boost, including adoption credits and health flexible spending account (FSA) contribution limits.
And yes, these changes could be relevant to New Yorkers, too. Here’s a breakdown of what’s changing, how much certain tax credits and deductions are increasing, and what taxpayers should know ahead of the 2027 tax year.
What is changing with the Child Tax Credit in 2027?
One of the biggest updates concerns the Child Tax Credit, which is increasing by $100 for the 2027 tax year.
The maximum credit will rise from $2,200 in 2026 to $2,300 in 2027. Meanwhile, the refundable portion of the credit is increasing from $1,700 to $1,800.
This means eligible families could receive a larger tax benefit when claiming the credit, although the amount they qualify for depends on their individual circumstances and income.
The Earned Income Tax Credit is also increasing
Another change that could benefit working Americans is the increase to the Earned Income Tax Credit (EITC).
For the 2027 tax year, the maximum EITC for qualifying taxpayers with three or more children will increase to $8,496, up from $8,231 in 2026.
The Earned Income Tax Credit is designed to help eligible low- to moderate-income workers and families. The amount someone receives depends on factors such as their income, filing status, and number of qualifying children.
The standard deduction is going up in 2027
Another change that could affect a much broader group of taxpayers: the IRS is increasing the standard deduction across filing categories.
For the 2027 tax year, the standard deduction amounts will be:
- Married couples filing jointly: $33,200, up from $32,200 in 2026
- Single taxpayers and married individuals filing separately: $16,600
- Heads of household: $24,925
The standard deduction reduces the amount of income subject to federal income tax for taxpayers who claim it rather than itemizing individual deductions.
The IRS has also announced updated federal income tax brackets for 2027, with the top marginal tax rate remaining at 37%.
Estate tax exemption and gift tax exclusion limits are increasing
The IRS is also adjusting the federal estate tax exemption and annual gift tax exclusion for 2027.
The estate tax exclusion will increase from $15 million in 2026 to $15.48 million in 2027. This is the amount that can generally be excluded from federal estate taxes for someone who dies during the 2027 calendar year.
Meanwhile, the annual gift tax exclusion will rise from $19,000 to $20,000 per recipient.
In practical terms, an individual can generally give up to $20,000 to another person during 2027 without that gift counting toward their lifetime estate and gift tax exemption. Married couples may generally combine their exclusions, potentially allowing them to give $40,000 per recipient.
It’s worth noting that the annual exclusion applies separately to each recipient, and gifts above that threshold may require additional tax reporting. That doesn’t necessarily mean the giver will owe gift tax.
Other IRS tax changes taking effect in 2027
Beyond the bigger tax credits and deductions, the IRS has announced several other inflation-related adjustments for the upcoming tax year.
Here’s what else is changing:
- Adoption tax credit: The maximum credit for qualified adoption expenses will increase from $17,670 to $18,250. Up to $5,280 of the credit may be refundable
- Health flexible spending accounts (FSAs): The annual contribution limit will increase from $3,400 to $3,500. For plans that allow unused funds to carry over, the maximum carryover amount will increase from $680 to $700
- Employer-provided childcare tax credit: The maximum credit available to employers will increase from $500,000 to $515,943.67. Eligible small businesses may qualify for a higher maximum of $619,132.40
- Foreign earned income exclusion: The exclusion will increase from $132,900 to $137,300 for qualifying Americans working abroad
When do the new 2027 IRS tax changes take effect?
Before getting too excited about the upcoming tax benefits, there’s one important distinction to keep in mind.
These adjustments apply to the 2027 tax year, meaning they generally affect income earned and qualifying expenses incurred during 2027. Taxpayers will typically report those amounts when filing their 2027 federal income tax returns in 2028.
In other words, these aren’t changes to the tax returns most Americans will be filing in spring 2027. Those returns generally cover the 2026 tax year.
The IRS publishes these annual adjustments to account for inflation, so taxpayers can expect certain tax brackets, deductions, credits, and exemptions to change from one year to the next.
For the full breakdown, taxpayers can consult the IRS’s official 2027 tax inflation adjustments.
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