Americans may be able to earn more before moving into higher federal income tax rates next year, with federal tax brackets expected to increase by 3.2%, according to fresh projections from Bloomberg Tax.
The IRS adjusts its tax brackets each year for inflation, a step that can provide some financial relief to people whose income is taxed at lower rates. While the agency hasn’t yet announced its new inflation-adjusted tax brackets — an announcement it usually makes in October or November — Bloomberg Tax on Friday issued its forecast for the 2027 tax changes.
Bloomberg Tax based its forecast on the inflation gauge used by the IRS, the “chained Consumer Price Index.” Because the Labor Department had not released October 2025 inflation figures amid the government shutdown, the firm said it relied on an 11-month average to estimate the adjustment.
The IRS did not immediately respond to a request for details on when it will publish its official inflation-adjusted tax brackets for the next filing season.
Bloomberg Tax expects the income limits across the IRS’s seven tax brackets to rise 3.2% next year, compared with a 2.7% adjustment for the current tax year. The annual update matters because it helps protect taxpayers from “bracket creep,” a stealth tax increase that can happen when wages rise with inflation but tax thresholds do not.
The larger projected inflation adjustment comes as prices have moved higher in 2026, driven in large part by the Iran war. The conflict has helped push diesel prices to over $6 a gallon, a record high, while gasoline has stayed above $4 a gallon. The August Consumer Price Index report showed inflation increasing by a higher-than-expected 3.4% from a year earlier.
If tax brackets were not adjusted each year for inflation, workers receiving cost-of-living raises could find themselves taxed at higher rates even though their purchasing power had not actually improved.
Under Bloomberg Tax’s estimates, the 12% federal tax bracket for married couples filing jointly would apply to taxable income between $25,601 and $104,050, with the upper end of that band increasing by $3,250 from 2026. Only income within that range would be taxed at 12%, while earnings below $25,601 would remain subject to the 10% rate.
Single taxpayers are also expected to see their federal income tax brackets move higher in 2027, Bloomberg Tax said.
The standard deduction is projected to increase as well, climbing to $33,200 for married couples filing jointly and $16,600 for single filers. Those figures are up from $31,500 and $15,750, respectively, for the current tax year.
