Inflation prompts new credit and bracket updates
The Internal Revenue Service has released its 2026 tax inflation adjustments, affecting how much Americans will owe or receive in refunds next year. Families may benefit from increases in the child tax credit, earned income tax credit (EITC), adoption credit, and more.
The IRS made the announcement one day after revealing plans to furlough nearly half its staff due to the ongoing government shutdown. Despite the disruption, the agency confirmed adjustments to federal income tax brackets, capital gains brackets, and dozens of other provisions.
Child tax credit holds at $2,200
As established by President Donald Trump’s 2025 tax reform bill, the maximum child tax credit remains at $2,200 per qualifying child for tax years 2025 and 2026. This is up from the previous $2,000 cap. The refundable portion stays at $1,700 for 2026, meaning eligible families can receive that amount back even if they owe no federal taxes.
Earned income tax credit expands
The EITC, which benefits low- and moderate-income workers, will rise across all categories in 2026:
- Three or more children: $8,231 (up from $8,046)
- Two children: $7,316 (up from $7,152)
- One child: $4,427 (up from $4,328)
- No children: $664 (up from $649)
To qualify, income must fall below specific thresholds. For married couples filing jointly, full phase-out occurs at:
- $70,224 for three or more children
- $65,899 for two children
- $58,863 for one child
- $26,820 for no children
For single, head of household, or widowed filers, phase-out thresholds are slightly lower. Additionally, investment income must remain under $12,200 in 2026 to qualify.
Adoption credit and gift exclusions rise
The adoption credit will increase to $17,670 for qualified expenses in 2026, with up to $5,120 refundable. This provides greater support for families navigating adoption costs.
The annual gift tax exclusion remains at $19,000. However, gifts to a non-U.S. citizen spouse will rise to $194,000, up from $190,000 in 2025.
