The IRS has announced new federal income tax brackets that will take effect in October, changing how much workers have withheld from their paychecks in 2026. This update increases income ranges for the lower brackets by about 4%, and for the higher brackets by roughly 2.3% compared to the previous year.
These adjustments are part of inflation-based changes designed to help taxpayers keep more of their earnings. Besides tax brackets, the IRS also updated standard deductions, capital gains brackets, and other tax provisions.
The recent legislation signed into law by President Donald Trump permanently extended the 2017 tax cuts and enhanced various tax benefits. These include a higher standard deduction, increased child tax credit, and expanded temporary tax breaks such as bonus deductions for seniors and greater state and local tax deductions.
Although many of these changes applied in 2025, withholding tables remained unchanged until 2026. As a result, employees generally did not see pay raise adjustments last year, but may have received larger tax refunds after filing 2025 tax returns.
Starting in 2026, paycheck withholding amounts will be updated to reflect these new tax laws. According to Garrett Watson, policy director at the Tax Foundation, “withholdings dictate how much employers retain for income and payroll taxes” and will now be adjusted to fit the updated rules.
Andrew Lautz of the Bipartisan Policy Center notes that most workers can expect modest paycheck increases under the new system. He says, “For most workers, we’re talking about a couple of dollars a paycheck, unless you’re claiming the tips and overtime deductions.”
Higher tax brackets mean individuals can earn more income before moving into a higher tax rate. This wide bracket structure generally results in a slightly larger take-home pay if income levels stay the same compared to the previous year.
However, not every taxpayer will experience significant changes. Those whose earnings are near the threshold of a bracket might see some benefit, while others might not notice any difference.
Taxable income is determined by subtracting the greater of either the standard or itemized deductions from adjusted gross income. As these deductions increase, taxpayers may reduce the portion of income subject to taxation.
The adjustments to tax brackets are based on inflation from the previous year. Yet, according to the Bureau of Labor Statistics, inflation as measured by the consumer price index increased by 2.7% in November compared to the prior year. This is higher than many of the IRS’s tax bracket adjustments.
The variation between inflation rates and tax bracket increases means that some households could continue to feel the effects of rising costs despite bracket changes. Personal inflation rates can differ depending on spending patterns and consumption of goods and services.
Here is a summary of key changes affecting paychecks and tax withholdings in 2026:
1. Income ranges for the two lowest tax brackets increased by about 4%.
2. Higher tax brackets rose approximately 2.3%.
3. Standard deduction and child tax credit amounts were boosted.
4. Updated rules are expected to slightly increase take-home pay for most workers.
5. Inflation adjustments lag behind current consumer price inflation, affecting the real impact of these changes.
Understanding these updates helps taxpayers better prepare for how their paychecks and annual tax filings might change. Employers will adjust withholding tables to comply with new IRS guidance, reflecting the latest tax laws.
While the paycheck impact is generally small, it is a sign of ongoing efforts to align tax policy with inflation and legislative adjustments. Monitoring pay stubs and consulting tax professionals can ensure appropriate withholding, avoiding surprises at tax time.
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