2026 Tax Inflation Adjustments: The Rev. Proc. 2025-32 Numbers CPA Firms Use Most

Rev. Proc. 2025-32 sets the 2026 inflation-adjusted amounts for the Internal Revenue Code. It is different from earlier annual procedures because it also reflects Public Law 119-21 (the One, Big, Beautiful Bill Act, July 4, 2025), which changed some figures by statute and made others permanent. The procedure states the amounts are for the Code as in effect on October 9, 2025, and tells taxpayers to look for further guidance if the Code is amended after that date. This article collects the figures a tax practice looks up most often, with the section of the procedure that supplies each one.

What did the 2025 legislation change in the annual adjustments?

Section 2 of the procedure lists the statutory changes that drive the 2026 numbers:

• The seven individual rates (10, 12, 22, 24, 32, 35 and 37 percent) and the four trust rates (10, 24, 35 and 37 percent) are permanent.
• The basic standard deduction was set by statute for 2025 at $15,750 (single and married filing separately), $23,625 (head of household) and $31,500 (joint and surviving spouse), then indexed after 2025.
• The section 179 maximum was raised to $2,500,000 with a $4,000,000 phase-out threshold for 2025, then indexed after 2025.
• The basic exclusion amount for estate and gift tax is $15,000,000 for 2026, indexed from 2027.
• The child tax credit is $2,200 for 2025, indexed after 2025.
• The section 6041(a) reporting threshold is $2,000 for payments made after December 31, 2025, indexed for returns required to be filed in 2027.
• Section 199A gained a $400 minimum deduction and a $1,000 minimum qualified business income requirement for taxable years beginning after 2025.

What are the 2026 individual figures?

The procedure also publishes the full rate tables for joint returns, heads of household, unmarried individuals, separate returns and estates and trusts. Use the table in section 4.01 for tax computations rather than a secondary summary.

What are the 2026 capital gains breakpoints?

Section 4.03 gives the maximum zero rate amounts and maximum 15 percent rate amounts:

Worked example: a joint return with long-term gain

A married couple has 2026 taxable income of $110,000, of which $40,000 is long-term capital gain that qualifies for the preferential rates.

• Ordinary income part: $110,000 minus $40,000 = $70,000.
• Room left in the 0 percent band: $98,900 minus $70,000 = $28,900. That much gain is taxed at 0 percent.
• Gain above the band: $40,000 minus $28,900 = $11,100, taxed at 15 percent = $1,665.

The tax on the ordinary part comes from the section 4.01 joint table, which is applied to the $70,000 in the usual way. The gain adds $1,665.

What are the 2026 business and pass-through figures?

• Section 179 (section 4.24): the maximum expense is $2,560,000, reduced dollar for dollar by the amount that section 179 property placed in service exceeds $4,090,000. The sport utility vehicle limit is $32,000. See section 179 and bonus depreciation after the 2025 legislation and the standards page.
• Section 199A (section 4.26): the threshold is $403,500 for joint returns, $201,750 for other returns and $201,775 for separate returns. The phase-in ranges end at $553,500, $276,750 and $276,775. See the QBI deduction after the 2025 legislation.
• Section 448 gross receipts test (section 4.30): a corporation or partnership meets the test if its average annual gross receipts for the three prior taxable years do not exceed $32,000,000. The same test governs the inventory, uniform capitalization and long-term contract small-business exceptions that cross-reference it. See the section 448 explainer.
• Excess business loss (section 4.31): the threshold is $256,000, or $512,000 for joint returns.
• Section 1274A (section 4.40): a qualified debt instrument has stated principal that does not exceed $7,462,600, and a cash method debt instrument has stated principal that does not exceed $5,330,500.
• Alternative minimum tax (section 4.10): exemption amounts of $140,200 (joint), $90,100 (unmarried) and $70,100 (separate); the 28 percent rate begins above excess taxable income of $244,500 ($122,250 if separate). Phase-out begins at $1,000,000 for joint returns and $500,000 for unmarried and separate returns.

Worked example: a section 179 phase-out

A client places $4,590,000 of section 179 property in service in 2026.

• Excess over the threshold: $4,590,000 minus $4,090,000 = $500,000.
• Reduced limit: $2,560,000 minus $500,000 = $2,060,000.

The client may elect to expense up to $2,060,000. The remaining $2,530,000 of cost is recovered through ordinary depreciation, with any bonus depreciation the client is entitled to.

What are the gift and estate figures?

For calendar year 2026 the annual gift exclusion is $19,000 per donee. Gifts to a spouse who is not a U.S. citizen are excluded up to $194,000. The basic exclusion amount for estates and the generation-skipping transfer exemption are each $15,000,000. For estates of decedents dying in 2026, the special use valuation limit under section 2032A is $1,460,000. See estate and gift tax planning after the 2025 legislation.

Which penalty amounts apply to returns filed in 2027?

The procedure also adjusts penalty amounts for returns required to be filed in 2027:

• The dollar amount used for the partnership return penalty under section 6698(b)(1) and the S corporation return penalty under section 6699(b)(1) is $260 each.
• The preparer penalties under section 6695 are $65 per failure for the furnish, sign, identify and retain failures, and $665 for check negotiation and due diligence failures.
• For information returns under section 6721 and payee statements under section 6722, the general rule is $340 per return, and the cap is $4,191,500 for filers with average annual gross receipts of more than $5,000,000.

The 2026 HSA limits ($4,400 self-only and $8,750 family) come from Rev. Proc. 2025-19; see HSA changes after the 2025 legislation. For 1099 reporting changes, see the 2026 Form 1099 thresholds.

How should a firm use this in practice?

Pull the amounts into the tax software's annual update checklist and tie each one back to the section of Rev. Proc. 2025-32 in the workpaper. Where a client's position turns on a threshold, such as section 179 or section 448, keep the three-year gross receipts schedule or the cost schedule with the return file.

CORAA prepares ready-to-review audit files for US CPA firms; see /us.

Sources

• IRS, Rev. Proc. 2025-32, 2026 inflation adjusted items: https://www.irs.gov/pub/irs-drop/rp-25-32.pdf
• IRS, Rev. Proc. 2025-19, 2026 inflation adjusted amounts for health savings accounts: https://www.irs.gov/pub/irs-drop/rp-25-19.pdf

AU-C references are to AICPA Professional Standards, paraphrased here; read the standard itself before relying on a requirement. This page is guidance, not professional advice. Report an error