Federal Tax News for Individuals: Nov. 2025

Tax Brackets and Standard Deductions for 2026

The IRS has announced its annual inflation-adjusted income tax brackets and other amounts. For 2026, the highest rate (37%) will apply to taxable income over $640,600 for individuals ($768,700 for married filing jointly and $384,350 for married filing separately).

The standard deduction is increasing to $16,100 for individuals and married taxpayers filing separately ($32,200 for married couples filing jointly and $24,150 for heads of households). Single filers age 65 or older will be eligible to take an additional deduction of $2,050 ($1,650 for married filers). Alternative minimum tax exemptions and adoption credits are among the other items that have been adjusted for 2026.

An Updated Tax Break for Educators in 2026

Teachers and other educators should be glad to know that the above-the-line tax deduction they can claim for unreimbursed educator expenses will soon rise. Currently $300 per year, in 2026 the maximum deduction will increase to $350. It will be adjusted for inflation in the future. Married educators who file a joint return can each take the credit.

Examples of qualified expenses include books, classroom supplies, computer equipment and professional development tuition. To qualify for the deduction, a taxpayer must be a teacher or other "eligible educator" and work at least 900 hours during the school year in a public or private elementary or secondary school. Contact us with questions.

More Help for Adoptive Parents

If you want to expand your family by adopting a child, you'll be pleased to know that a federal tax credit is available to help adoptive parents offset some of the costs. In 2025, the credit is for up to $17,280 of qualified expenses, with phaseouts for higher-income parents. New in 2025, up to $5,000 of the credit is refundable.

You generally can carry forward any nonrefundable amount for up to five years. In 2026, the maximum credit will increase to $17,670, and the refundable portion will increase to $5,120. Qualified expenses include adoption fees, legal costs and travel expenses. In addition, there may be state tax benefits. Questions? Contact us.

2026 Figures for the Federal Gift and Estate Tax Exemption

Normally, certain inflation-adjusted numbers affect taxpayers' estate plans every year. One is the federal gift and estate tax exemption. But for 2026, the One Big Beautiful Bill Act (OBBBA) permanently increases the exemption amount to $15 million (up from $13.99 million for 2025).

That amount will be adjusted annually for inflation for 2027 and beyond. Without the OBBBA, the exemption would have returned to an inflation-adjusted $5 million for 2026. The generation-skipping transfer tax exemption amount also increases to $15 million for 2026 and will be annually adjusted for inflation after that.

Consider a Health Savings Account to Save Money

Health insurance open enrollment began Nov. 1. One option is a high-deductible health plan (HDHP) paired with a Health Savings Account (HSA). You fund the higher deductible by contributing pretax income to the HSA. The 2026 contribution limits are $4,400 for self-only accounts and $8,750 for family coverage.

You can withdraw HSA funds tax-free to pay for qualified medical expenses. For 2026, qualified HDHPs must have annual deductibles that aren't less than $1,700 for self-only coverage or $3,400 for family coverage. Annual out-of-pocket expenses (deductibles, co-payments and other amounts, but not premiums) can't exceed $8,500 for self-only coverage or $17,000 for family coverage.