2026 Tax Brackets and Inflation Adjustments: What to Expect
Filing & Brackets · 2026 FILING
The IRS releases annual inflation adjustments affecting tax brackets, standard deductions, retirement contribution limits, and more. Here are the key 2026 numbers for planning your withholding and estimated taxes.
Each year, the IRS adjusts tax brackets, deductions, and contribution limits for inflation under a process called annual inflation adjustments. For 2026 (covering income earned in 2025, filed in 2026), these adjustments mean slightly more income can fall into lower tax brackets compared to 2025 — a modest but real benefit for most taxpayers.
The Seven Tax Brackets for 2025
The United States uses a progressive tax system with seven marginal rates:
10% — Lowest bracket
12% — Second bracket
22% — Middle bracket
24% — Upper-middle bracket
32% — Higher bracket
35% — Near-top bracket
37% — Top bracket (applies above approximately $626,350 for single filers, $751,600 for MFJ)
These rates were made permanent by the OBBBA. Annual inflation adjustments move the dollar thresholds for each bracket slightly upward each year.
How Marginal Rates Work
A common misunderstanding: being in the '22% bracket' does not mean all your income is taxed at 22%. Only the income within that bracket is taxed at 22%. Your first dollars of taxable income are taxed at 10%, then 12%, then 22%, and so on. Your effective tax rate — what you actually pay as a percentage of total income — is almost always lower than your marginal rate.
Standard Mileage Rate: 70 Cents Per Mile
For 2025, the IRS standard mileage rate for business use of a vehicle is 70 cents per mile. This rate is used to calculate the deductible cost of using your personal vehicle for business purposes as an alternative to tracking actual expenses. The rate is adjusted periodically based on fuel costs and vehicle operating expenses.
Retirement Contribution Limits for 2025
Key retirement contribution limits for tax year 2025:
• 401(k) / 403(b) / 457 employee contribution limit: $23,500
• Catch-up contribution (age 50–59, 64+): +$7,500
• Enhanced catch-up (age 60–63, new under SECURE 2.0): +$11,250
• IRA contribution limit: $7,000
• IRA catch-up (age 50+): +$1,000
• HSA contribution limit: $4,300 (self-only) / $8,550 (family)
Third-Party Payment Reporting Threshold
For 2025 and beyond, the threshold for third-party payment networks (Venmo, PayPal, Cash App, eBay, etc.) to issue Form 1099-K is $5,000 (up from the $600 threshold that was briefly in effect). The OBBBA raises this further to $20,000 for future years. Note: receiving a 1099-K does not automatically mean you owe taxes — it depends on whether the payments were for taxable income.
Frequently Asked Questions
What is the highest federal income tax rate in 2025?
37%. This rate applies to taxable income above approximately $626,350 for single filers and $751,600 for married filing jointly.
What is the standard mileage rate for 2025?
70 cents per mile for business use of a personal vehicle.
How much can I contribute to my 401(k) in 2025?
$23,500 in employee contributions. If you're age 50–59 or 64+, you can add another $7,500. Ages 60–63 can add $11,250 as an enhanced catch-up under SECURE 2.0.
I received a 1099-K from PayPal. Do I owe taxes?
It depends. If the payments were for goods or services sold at a profit, you likely owe tax on the profit. If you were reimbursed for personal expenses or sold personal items for less than you paid, those are generally not taxable. A tax professional can help sort this out.
When are 2025 estimated tax payments due?
Q1: April 15, 2025. Q2: June 16, 2025. Q3: September 15, 2025. Q4: January 15, 2026. If you are self-employed or have significant non-wage income, you likely need to make quarterly estimated payments to avoid underpayment penalties.