Nearly every year, regardless of larger legislation like the One Big Beautiful Bill Act, the IRS increases income thresholds on tax brackets. This could change your marginal tax rate, or the highest tax rate you pay on your income. The IRS also typically increases the standard deduction annually, in line with other inflation adjustments. At the same time, Social Security typically issues cost-of-living adjustment (COLA) increases, putting more money in the monthly checks of those collecting Social Security benefits in retirement.
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These changes have tax ramifications that affect retirees on a fixed income and older adults still in the workforce.
New Income Thresholds for 2026
Income thresholds that determine tax brackets increased by roughly 2.8%, which tracked closely with inflation from December 2024 to December 2025, according to Consumer Price Index (CPI) data. Inflation rose roughly 2.4% between January 2025 and January 2026, based on data from The Economics Daily from the US Bureau of Labor Statistics.
These are the new income thresholds for the current (2026) tax year. Keep in mind, these numbers affect tax filings due April 15, 2027 – not tax returns due in 2026.
Marginal rate
Individual income
Married couples filing jointly
10%
Up to $12,400
Up to $24,800
12%
$12,401 to $50,400
$24,801 to $100,800
22%
$50,401 to $105,700
$100,801 to $211,400
24%
$105,701 to $201,775
$211,401 to $403,550
32%
$201,776 to $256,225
$403,551 to $512,450
35%
$256,226 to $640,600
$512,451 to $768,700
37%
Over $640,600
Over $768,700
The increase could bode well for retirees, according to Joe Marmorato, CFP, CPA, senior tax strategy advisor at Savant Wealth Management.
“A larger share of a taxpayer’s income will now fall into lower tax brackets. This means that seniors earning roughly the same amount as the previous year may end up owing less in federal income taxes this year,” he said.
If you’re still working, you may want to evaluate the withholding taxes in your paycheck to see if you should adjust how much the government takes out. Ideally, you don’t want to owe taxes when you file, but you also don’t want a huge tax refund.
A large tax refund only means you gave the federal government an interest-free loan for part of the year, which the IRS gives back in the form of a refund when you file your taxes. Combined with other inflation adjustments, including a larger standard deduction and a deduction for seniors, the 50+ crowd could enjoy a few windfalls for the 2026 tax year.
Standard Deduction Boost Could Yield Higher Tax Refunds
The standard deduction, or the amount you can deduct from your gross household income if you don’t itemize, increased from $15,750 for single taxpayers (or married, filing separately) to $16,100. Married couples filing jointly can deduct $32,200, up from $31,500. Those filing head-of-household can deduct $24,150, up from $23,625, according to an IRS news release.
Don’t Forget the Enhanced Senior Deduction
Between 2025 and 2028, seniors ages 65+ can claim an additional $6,000 per person standard deduction, which means married couples where both spouses are 65+ can write off an additional $12,000. The deduction starts phasing out for taxpayers with a Modified Adjusted Gross Income (MAGI) of $75,000 ($150,000 for married filing jointly), and is eliminated when income hits $175,000 or $250,000, respectively.
“These increased refunds can boost disposable income, potentially supporting consumer spending and therefore contribute to broader economic growth,” Marmorato said.
Social Security Increases
On the other hand, Social Security’s annual COLA increase may not have as much of an effect on the economy – or on retirees’ wallets. The 2.8% COLA increase exceeded inflation but failed to keep pace with many other rising costs. “Essential costs such as healthcare and housing continue to rise at a faster pace than 2.8%, which could force some seniors to cut back on discretionary spending,” Marmorato said. “This pullback could end up slowing growth in industries that rely heavily on older consumers.”
On the bright side, he added, “The fact that tax bracket thresholds increased more than the Social Security COLA bodes well for seniors, as their taxable income is less likely to creep into higher brackets.”
2026 Tax Outlook for Seniors
The next few years could leave more money in the wallets of many older taxpayers thanks to a larger standard deduction and the $6,000 senior deduction for those who don’t exceed the income threshold. Maximum monthly Social Security benefits also increased in 2026, which is good for retirees.
However, Marmorato said, “The Social Security taxation thresholds don’t adjust for inflation, so more seniors end up having more of their benefits taxed each and every year regardless of how big or small the cost-of-living adjustment is.”
Additionally, the higher taxable earnings cap for Social Security taxes increased to $184,500, up from $176,100 in 2025, which can affect workers’ take-home pay.
If you haven’t already started tax planning for this year, it’s a good time to speak with a tax professional. Inflation adjustments may balance out for some taxpayers, but knowledge is power.