Sometime in the next several weeks the IRS will publish a revenue procedure that quietly resets more than 60 parts of the tax code for 2027: the bracket thresholds, the standard deduction, the earned income credit and dozens of phase-outs. Last year’s version, Revenue Procedure 2025-32, came out on October 9, 2025. This year’s has not appeared yet.
It will be a bigger reset than usual. Consumer prices rose 3.7% in the twelve months to September, according to BLS data released October 14, and the Social Security Administration announced a 3.6% cost-of-living adjustment for 2027 the same day. The tax code uses a different inflation gauge and a different window, but it points the same way: a step-up of roughly 3.2%, compared with 2.7% for 2026.
1. How the IRS does the math
Section 1(f) of the Internal Revenue Code ties most dollar amounts to the chained consumer price index (C-CPI-U), averaged over the twelve months ending August 31 of the prior year. The 2017 tax law switched the code to this chained measure, which tends to rise a bit more slowly than the standard CPI because it accounts for consumers substituting cheaper goods.
Two consequences follow. First, the September CPI print does not enter the 2027 tax numbers at all; the window closed at the end of August. Second, the result is already knowable. Averaging BLS’s published chained CPI from September 2025 through August 2026 and comparing it with the prior twelve months gives an increase of about 3.2%. Bloomberg Tax’s September projection lands in the same place.
There is one wrinkle. BLS did not publish an October 2025 index because of the federal funding lapse that fall, so this year’s average rests on eleven months of data instead of twelve. The IRS will have to apply the statute to an incomplete series, and its exact treatment will be visible only when the revenue procedure is out.
2. The numbers that will change
The table below shows the official 2026 figures and the projected 2027 standard deduction. The 2027 amounts are estimates, not law, until the IRS publishes them.
| Item | 2026 (official) | 2027 (projected) |
|---|---|---|
| Standard deduction, married filing jointly | $32,200 | ~$33,200 |
| Standard deduction, single | $16,100 | ~$16,600 |
| Standard deduction, head of household | $24,150 | Not yet projected |
| 10% bracket ceiling, single / joint | $12,400 / $24,800 | Indexed |
| 37% bracket starts, single / joint | $640,600 / $768,700 | Indexed |
| Annual gift exclusion | $19,000 | Indexed in $1,000 steps |
For a typical married couple the standard deduction alone would rise by about $1,000. Bracket thresholds move by the same percentage, which means a raise that merely keeps pace with inflation should not push anyone into a higher rate.
The tax code adjusts for inflation by default. The newest breaks were written in fixed dollars, so inflation erodes them.
3. The breaks that will not move
The 2025 reconciliation law (P.L. 119-21) created several deductions that are capped in flat dollars and run only from 2025 through 2028. Per IRS guidance:
- Tips: deduction up to $25,000, phasing out above $150,000 of modified AGI ($300,000 joint).
- Overtime: deduction up to $12,500 ($25,000 joint), with the same income phase-out.
- Seniors: an extra $6,000 per person age 65 or older, $12,000 for a qualifying couple.
None of those caps is indexed. At 3% to 4% inflation, the real value of each one shrinks every year until it expires. The state and local tax deduction cap behaves differently: the law sets it at $40,000 for 2025 and raises it by 1% a year, so it is scheduled to reach $40,804 in 2027. That 1% step is well below current inflation, before the cap falls back to $10,000 in 2030.
4. Who notices
For most wage earners the adjustment works silently through 2027 withholding tables. It matters more for people near a threshold: retirees managing taxable income around the senior deduction phase-out, small-business owners near the qualified business income limits, and anyone deciding whether to bunch deductions into one year. Payroll offices and tax-software vendors will reprogram as soon as the revenue procedure appears.
5. What to watch
- Late October to November: The IRS revenue procedure with official 2027 figures, usually announced in an IRS newsroom release.
- November 10: October CPI. It will not affect 2027 tax brackets, but it feeds the 2028 calculation.
- Early 2027: The filing season for 2026 returns opens. Those returns use the 2026 figures above; the new 2027 numbers show up first in paychecks through withholding.
- IRS releases tax inflation adjustments for tax year 2026 — Internal Revenue Service · irs.gov
- Revenue Procedure 2025-32 — Internal Revenue Service · irs.gov
- One, Big, Beautiful Bill provisions: individuals and workers — Internal Revenue Service · irs.gov
- Consumer Price Index, September 2026 — Bureau of Labor Statistics · bls.gov
- Social Security Announces 3.6 Percent Benefit Increase for 2027 — Social Security Administration · ssa.gov
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