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The Internal Revenue Service published Revenue Procedure 2025-32 in October 2025, setting the inflation adjustments for federal income tax in tax year 2026 — returns that will be filed in 2027. The changes raise the thresholds for each marginal bracket and increase the standard deductions, directly affecting those living in the United States on a green card, tax-resident status under the Substantial Presence Test, or other categories taxed on worldwide income.
The legislative backdrop for this update is notable. The One Big Beautiful Bill Act, signed into law in July 2025, permanently extended several Tax Cuts and Jobs Act provisions from 2017 that had been set to expire in December of that year. Without that legislation, marginal rates would have reverted to pre-2018 levels and the standard deduction would have been cut nearly in half. For immigrants planning long-term filings, this means tax predictability at least until the next structural reform.
Marginal Rate Structure
The seven marginal rates remain unchanged: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. What changes in 2026 are the income thresholds defining each bracket, all increased by approximately 2.7% to track inflation as measured by the Chained CPI.
For single filers, the 10% bracket covers taxable income up to $12,400. The 12% bracket extends to $50,400, the 22% to $105,700, the 24% to $201,775, the 32% to $256,225, the 35% to $640,600, and everything above that is taxed at 37%.
For Married Filing Jointly, the thresholds nearly double: 10% up to $24,800, 12% up to $100,800, 22% up to $211,400, 24% up to $403,550, 32% up to $512,450, 35% up to $768,700, and 37% above.
Standard Deduction for 2026
The standard deduction is the amount that automatically reduces gross taxable income for those who choose not to itemize deductions. For 2026, the IRS confirmed:
- Married Filing Jointly and qualifying surviving spouses: $32,200, up $700 from 2025
- Single and Married Filing Separately: $16,100, up $350
- Head of Household: $24,150, up $525
Taxpayers who are 65 or older, or blind, receive an additional standard deduction. In 2026, this extra amount is $1,650 for married filers (per qualifying spouse) and $2,050 for single filers and heads of household.
Senior Bonus Introduced by the OBBBA
The OBBBA created a temporary additional deduction of $6,000 for taxpayers aged 65 or older, valid from 2025 through 2028. Couples where both spouses are 65 or older can combine $12,000. The benefit phases out starting at a Modified Adjusted Gross Income of $75,000 (single) or $150,000 (MFJ), decreasing by 6 cents for each dollar above those thresholds. With MAGI above $175,000 (single) or $250,000 (MFJ), the bonus disappears entirely.
Impact for Green Card Holders
Lawful permanent residents are taxed as U.S. persons — meaning on worldwide income, including rental income, dividends, capital gains, and wages earned in any country. The new brackets and deductions apply in full to these taxpayers, with the additional obligation to report foreign accounts via FBAR (FinCEN 114) when the aggregate balance exceeds $10,000 at any point during the year, and via FATCA (Form 8938) above applicable thresholds.
The practical effect of the increased standard deduction is that joint gross income up to approximately $32,200 may fall outside the federal taxable base even before applying credits such as the Child Tax Credit (maintained at $2,200 per qualifying child in 2026, with $1,700 refundable).
Substantial Presence Test and Tax Residency
Those without a green card may still qualify as tax residents under the Substantial Presence Test: being present in the U.S. for at least 31 days during the current year and 183 days under the weighted formula (all days in the current year, plus one-third of days in the prior year, plus one-sixth of the year before that). Those who cross this threshold use the same brackets and standard deductions as any resident.
F-1 and J-1 student visa holders have a temporary exemption — they are treated as exempt individuals for the first five calendar years, with those days not counted toward the test. J-1 academic and physician visa holders have a two-out-of-six-year exemption.
Nonresident Aliens
Nonresident aliens file Form 1040-NR and are subject to distinct rules. They do not have access to the full standard deduction, except for students and business apprentices from India under the U.S.-India tax treaty. Effectively connected income from U.S. sources is taxed at the same marginal rates; fixed or determinable annual or periodical income not effectively connected (interest, dividends, royalties) is subject to a flat 30% withholding at the source, unless reduced by treaty.
Planning Strategies
With the new parameters, it is worth reviewing:
- An updated Form W-4 with your employer to adjust monthly withholding and avoid a disproportionate balance due or refund at filing time
- Contributions to a 401(k) and Traditional IRA, which reduce taxable income for the year. The 401(k) limit in 2026: $24,000 (up from $23,500 in 2025); catch-up contributions for those 50 and older: $8,000
- Taking advantage of the Saver’s Credit, Earned Income Tax Credit, and American Opportunity Credit based on eligibility
- Timing the exercise of stock options and RSUs to spread gains across tax years and avoid jumping into a higher marginal bracket
- Coordination with bilateral tax treaties (treaty tie-breaker rules) for those maintaining tax ties to their country of origin
The difference between simply reacting at the April filing deadline and planning throughout the year is often thousands of dollars for middle- and high-income brackets. Those who recently arrived in the U.S. and have not yet established an American tax history should consider consulting an Enrolled Agent or CPA specializing in expatriate taxation to avoid duplicate filings, unreported FBARs, and missed credits.
Victoria Harper
Editor-in-Chief
Leading journalism and editorial content at Visto n’ Visa, Victoria helps make immigration topics clear, trustworthy, and easy to understand. Her focus is on delivering useful, human, and relevant content for people exploring new paths abroad.
