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Your paycheck could be a little bigger in 2026 based on the latest IRS tax bracket changes and updates enacted via President Donald Trump’s “big beautiful bill.”
The IRS in October released new federal income tax brackets for 2026. The inflation-based change increased the income ranges for the two lowest tax brackets by about 4%, and the higher ones by roughly 2.3% compared to 2025. The agency also unveiled inflation adjustments for the standard deductions, capital gains brackets and other provisions.
Plus, workers will see 2026 paycheck withholding changes “layered on top of that,” based on Trump’s new law, according to Garrett Watson, director of policy analysis at the Tax Foundation. Withholdings dictate how much employers retain for income and payroll taxes.
Enacted in July, Trump’s legislation permanently extended his 2017 tax cuts, boosted the standard deduction, increased the child tax credit and added several temporary tax breaks. Those cuts include a bonus deduction for seniors, a bigger state and local tax deduction, tax breaks on tips and overtime income, among other provisions.
Many of these changes applied to 2025, but the IRS did not adjust withholding tables, and workers’ paychecks generally stayed the same through year-end. As a result, many could see a bigger tax refund when filing 2025 returns in 2026, experts say.
Once 2026 withholdings go into effect, “folks will see slightly larger paychecks,” assuming their income stays the same as 2025, said Andrew Lautz, director of tax policy for the Bipartisan Policy Center.
“For most workers, we’re talking about a couple of dollars a paycheck, unless you’re claiming the tips and overtime deductions,” depending on withholdings, he said.
How higher tax brackets impact your finances
When tax brackets increase, you can earn more before reaching the next income tax rate. If earnings stay the same from 2025 to 2026, wider brackets could mean a bit higher take-home pay. But some workers won’t feel the difference, experts say.
The federal income tax brackets reflect each portion of your taxable income, depending on your filing status. You calculate taxable income by subtracting the greater of the standard or itemized deductions from your adjusted gross income.
However, tax bracket adjustments are “a lagging measure of inflation over the prior year,” and the current figures can be higher, said Watson with the Tax Foundation.
The consumer price index, a key inflation measure, rose 2.7% in November 2025 compared with the previous year, the Bureau of Labor Statistics reported in December. That is more than most of the 2026 tax bracket adjustments.
Of course, your personal inflation rate could be different, depending on the goods and services your household consumes.
