There’s one fun — OK, not exactly fun, but not totally terrible — part of filing taxes: claiming all the deductions and credits you can. Just how much these tax breaks can reduce your final tax bill depends in part on amounts that are adjusted each year for inflation. Here are the 2026 tax year amounts for some popular tax deductions, credits, and income exclusions.
Many taxpayers look forward to tax filing season because they are getting a refund. Others, not so much. They owe tax, so they’re looking for ways to pay the smallest possible amount.
Uncle Sam can help taxpayers in either situation via the Internal Revenue Code.
Deductions are a relatively easy, and popular, way to reduce a tax bill or help get a refund. The most common are the standard deduction amounts discussed in Part 2 of this year’s annual tax inflation series.
Others include what are known as above-the-line deductions, which are subtracted from your gross income to calculate your adjusted gross income (AGI). The name originated when they all were on the old Form 1040, above the line where you entered your AGI. Now they are on the 1040’s Schedule 1
A benefit of above-the-line deductions, which are technically known as adjustments to income, is that you can claim any of them for which you qualify regardless of whether you take the standard deduction or itemize.
Then there are below the line deductions. These are subtracted from your AGI to help you reach a lower taxable income amount. Itemized deductions on Schedule A are the most well-known in the below the line category.
The One Big Beautiful Bill (OBBB) Act some more to this group, including four that will apply to 2025 tax returns. They are deductions for some tip income, some overtime pay, a portion of interest on auto loans, and a bonus deduction for filers age 65 and older.
Another great tax break is tax credits, which actually are better than deductions. While deductions reduce the amount of income that’s ultimately taxed, which generally produces a lower tax bill, credits reduce tax liability dollar-for-dollar. If your credits are large enough, they can erase what you owe the U.S. Treasury. And the refundable tax credits can, as the name indicates, get you a refund when the credit amount is more than the tax you owe.
Finally, don’t overlook income exclusions. In these cases, the tax code says that a portion of your income isn’t taxed at all.
And here’s the icing on the tax break cake. The IRS adjusts many of these tax-lowering options every year for inflation. Yes, dear readers, we have arrived at Part 3 of the 2026 tax year inflation series, an examination of next year’s increased deduction, credit, and exemption amounts.
Remember, these amounts apply to 2026 taxes, which will be filed in 2027. As in earlier (and coming) posts, I’ve also included for comparison the 2025 amounts that apply to the tax return you’ll file next year.
Child tax credit: Let’s start with one of the year-in-year-out most popular family-related tax breaks, the Child Tax Credit (CTC).
The CTC has been around in some form since 1997. Over those almost three decades, the amounts of the credit and qualifying limits have been revised, often in connection with major tax law reform bills or law revisions made in response to national crises, such as the COVID-19 pandemic.
That happened again this year. The OBBB upped the maximum CTC for the 2025 tax year to $2,200 per qualifying child. That was an increased from the prior $2,000 level. The new tax law left the refundable portion at $1,700.
In 2026, those CTC amounts — $2,200 per eligible child and a possible refundable amount of $1,700 — remain the same.
Adoption tax credit, employer assistance: The CTC is popular because as every family knows, kiddos cost a lot. That’s why lawmakers have added, in addition to the CTC, a variety of family-friendly breaks to the tax code.
Two of them are for families that grow via adoption. There’s a tax credit that filing adoptive parents can claim, as well as tax-free employer assistance for them.
Next year, eligible adoptive parents can claim a tax credit of up to $17,670 to help cover the costs of adding a new family member. The credit is available for all adoptions, including a child with special needs. That’s an increase from the $17,280 adoption credit allowed in 2025.
Some adoptive parents also might get help from their employers. In 2026, a company can provide eligible adoptive parents up to $17,670 in tax-free help to cover the costs associated with adding to their families. Yep, increase is the same as the tax credit maximum.
Both the adoption income exclusion and tax credit amounts will begin to phase out in 2026 when individuals have modified adjusted gross income, or MAGI, greater than $265,080. That’s an increase from 2025’s MAGI phase-out starting point of $259,190. (MAGI is modified adjusted gross income. It your adjusted gross income, or AGI, with certain deductions and non-taxable income sources added back. You can find more on MAGI in, shameless plug, the ol’ blog’s glossary.)
The adoption credit or income exclusion is eliminated in 2026 once adoptive parents hit MAGI of $305,080 or more. This tax benefit ends in 2025 when adoptive parents’ MAGI hits $299,190 or more.
Depending on the adoption’s cost, you may be able to claim both the tax credit and the exclusion. However, you can’t double dip; that is, you cannot claim both a credit and exclusion for the same adoption expenses.
And starting with the 2025 tax year, a provision in the OBBB Act makes the adoption tax credit also is partially refundable and the amount will be adjusted for inflation. This year, that’s a possible $5,000 that could be refunded to the filing adoptive parents. For 2026, the refundable portion is $5,120.
Qualifying relative tax credit: When you support a relative who is not your child (as far as the IRS definition goes), you might be able to claim this tax break. For many taxpayers, these will be actual relatives, such as elderly parents or a sibling who’s between jobs. But it’s not limited to formal family members.
As long as the person for whom you claim the tax credit meets the qualifying relative tests, that person is a relative in Uncle Sam’s eyes, and could claim this $500 tax credit.
One of those tests is, of course, income. And that amount is adjusted annually for inflation. For the 2026 tax year, the IRS’ says that the person you are claiming as a qualifying relative must earn less than $5,300. That’s $100 more than the 2025 limit.
Earned Income Tax Credit, or EITC: The Earned Income Tax Credit (EITC) was created in the 1970s as a way to help lower the taxes of middle- and lower-income workers.
While it’s a great benefit for families, one common misperception about the EITC is that you must have children to claim it. Not true, although the EITC does offer more help for larger families.
Annual inflation adjustments also help. For 2026, the maximum EITC amounts, determined by your family size, will be:
- $8,231 for taxpayers filing jointly who have three or more qualifying children, up from $8,046 in 2025;
- $7,316 with two qualifying children, up from $7,152 this tax year;
- $4,427 with one qualifying child, up from the current $4,328; and
- $664 if you don’t have any qualifying children, up from $649 in 2025.
All of these EITC amounts are refundable, meaning any credit that is more than your tax bill comes back to you as an IRS refund.
Of course, the key to claiming the EITC is to fall within its earnings’ guidelines. If you don’t make enough money, you can’t claim it. Make more, and the credit amount is reduced. And if you make what is deemed too much, you can’t claim the EITC at all.
To claim any EITC amount in 2026, inflation adjustments mean that your earned and adjusted gross income (AGI) next year each must be less than the maximum earnings amounts shown in the table below.
| Filing Status | No Children | 1 Child | 2 Children | 3 or More Children |
| Single, Head of Household or Surviving Spouse | $19,540 | $51,593 | $58,629 | $62,974 |
| Married Filing Jointly | $26,820 | $58,863 | $65,899 | $70,224 |
In addition, if you have what the IRS deems is “excessive investment income,” you’re not eligible for the EITC. For 2026, that earnings amount is $12,200.
For comparison, the 2025 tax year maximum EITC claim earnings limits are:
| Filing Status | No Children | 1 Child | 2 Children | 3 or More Children |
| Single, Head of Household or Surviving Spouse | $19,104 | $50,434 | $57,310 | $61,555 |
| Married Filing Jointly | $26,214 | $57,554 | $64,430 | $68,675 |
In 2025, the excessive investment income the excessive investment income amount is $11,950.
Student loan interest: Paying for higher education is a major expense, for students and their families. That’s why so many students and/or their families take out loans to pay for college.
Tax law allows for a deduction of up to $2,500 in interest paid on qualifying higher education loans. That deduction amount doesn’t change annually, but inflation adjustments do affect who can claim it. The student loan interest above-the-line deduction is based on your income, and those earnings thresholds can be affected by inflation.
In 2026, you can claim the full $2,500 student loan interest deduction as long as you, as a single taxpayer, have MAGI of $85,000 or less. The income threshold for the full deduction goes to $175,000 next year for married filing jointly taxpayers with college debt.
In 2025, you can claim the full $2,500 student loan interest deduction as long as you, as a single taxpayer, have MAGI of $85,000 or less (yes, it’s not changed in 2026). The income threshold for married filing jointly couples with student debt is $170,000 this year.
If you make more than these amounts for your filing status in either year, the loan deduction amount is reduced.
The loan interest deduction is totally eliminated in 2026 if your MAGI as a single filer is $100,000 or more. The deduction will be unavailable for married filing jointly taxpayers with MAGI of $205,000 or more next year. This year, the loan interest deduction is eliminated for single filers who make $100,000 or more. The educational assistance tax break for married joint filers with MAGI of $200,000 or more in 2025.
Savings Bond exclusion for higher education: Savings bonds are another way to help pay for some higher education costs. Interest earned on eligible Series EE and I bonds issued after 1989 is not taxed as long as the bond owner uses the redeemed bonds to pay qualified higher education expenses at an eligible institution.
In addition to meeting certain requirements, there’s also an income limit for the education-related savings bond interest exclusion.
This exclusion will start phasing out in 2026 for single filers with MAGI of more than $101,800. That’s a nice hike from 2025’s $99,500 earnings level. The income trigger for joint filers in 2026 is $152,650. That’s up from this year’s $149,250 MAGI on joint returns.
The tax-free savings bond interest exclusion is completely phased out in 2026 for single taxpayers with MAGI of $116,800. There’s no savings bond exclusion for single filers in 2025 when their MAGI hits $114,500.
Jointly filing couples with income of more than $182,650 in 2026 can’t get any tax benefit for their educational use of savings bonds. That’s up from the 2025 MAGI limit for joint filers with income of $179,250.
Educators’ expenses deduction: Tax breaks are for more than just students. Elementary and secondary school teachers, along with certain other educators, can claim some of their out-of-pocket classroom expenses as an above-the-line deduction. In 2026, this amount is bumped to $350, up from the $300 for the 2025 tax year.
Lifetime Learning Credit: The Lifetime Learning Credit (LLC) is great not just for full-time, usually younger college students. It also covers continuing education courses once you’re out of school, such as a class you took to improve your workplace skills.
This educational tax credit was expanded five years ago so that more could claim it. It is, however, still calculated as 20 percent of the first $10,000 in tuition expenses paid per year, up to a maximum credit of $2,000.
Like many tax breaks, the LLC maximum is reduced and ultimately phased out if you make what the IRS considers a lot of money. The phase-out begins at MAGI of $80,000 for single filers and $160,000 for jointly filing married taxpayers. The credit is unavailable for single taxpayers making $90,000 and joint filers earning $180,000.
These phase-out ranges used to be adjusted for inflation, but beginning in 2021, the law change set them at these now increased, but fixed, MAGI amounts. So, if there’s no inflation adjustment, why is this here? Because the IRS mentions the Lifetime Learning tax credit in its announcement of the 2026 inflation adjustments. Also, because it never hurts to give added attention to a tax saving tax credit.
Transportation fringe benefits: Commuting can tax your patience. Some companies help ease their workers’ road woes by offering tax-free commuting benefits. and cover the costs themselves. In 2026, employers can provide up to $340 a month to employees to offset their commuter highway vehicle travel, any transit pass, or qualified parking. That’s a $15 bump from this year’s $325 a month allowance.
Retirement Saver’s Credit: Finally, there’s tax help to save for retirement, a challenge for many who don’t have a lot left after paying for day-to-day essentials. Uncle Sam encourages these individuals to stash at least a little for their golden years via this special retirement savings tax credit.
Changes in 2026 to the Saver’s Credit also are included in Part 8 of the current inflation series on retirement-related inflation adjustments. But since this tax break is too often overlooked, it deserves another mention in this deduction, credit, and income exclusion post.
The Saver’s Credit is worth a maximum $1,000. You claim it based on the money you put into IRAs and workplace (both as an employee or as the self-employed boss) plans. However, it’s limited to folks who meet the annual earning requirements.
In 2026, the Saver’s Credit maximum earnings caps go to:
- $40,250 for singles and married filing separately taxpayers, up from $39,500 in 2025;
- $60,375 for heads of household, up from $59,250 this year; and
- $80,500 for married couples filing jointly, up from the 2025 limit of $79,000.
Here’s the full table and percentages, based on your adjusted gross income (AGI), for the 2026 Retirement Saver’s Credit.
| 2026 Saver’s Credit Amount | Single, married filing separately or qualifying widow/er | Married filing jointly | Head of household |
| 50% of your contribution | AGI not more than $24,250 | AGI not more than $48,500 | AGI not more than $36,375 |
| 20% of your contribution | $24,251 to $26,250 | $48,501 to $52,000 | $36,376 to $39,375 |
| 10% of your contribution | $26,251 to $40,250 | $52,001 to $80,500 | $39,376 to $60,375 |
| No credit | $40,251 or more | $80,501 or more | $60,376 or more |
And if you’re looking to claim the Saver’s Credit on your 2025 tax return, you can do so if your income this year falls within the following income ranges:
| 2025 Saver’s Credit Amount | Single, married filing separately or qualifying widow/er | Married filing jointly | Head of household |
| 50% of your contribution | AGI not more than $23,750 | AGI not more than $47,500 | AGI not more than $35,625 |
| 20% of your contribution | $23,751 to $25,500 | $47,501 to $51,000 | $35,626 to $38,250 |
| 10% of your contribution | $25,501 to $39,500 | $51,001 to $79,000 | $38,251 to $59,250 |
| No credit | $39,501 or more | $79,001 or more | $59,251 or more |
Tax inflation preview: And with that we wrap up the tax deduction, and more, party part of the ol’ blog’s annual tax inflation series. These many and varied ways to help reduce what we owe the U.S. Treasury, but they do require attention to detail.
Still, a little extra tax filing work usually is worth it when you end up owing less to Uncle Sam, and might even get a refund.
You can get a preview of what’s ahead in the 2026 version of tax-related inflation changes series. It also is a good indicator of why I do it as a series.
- 2026 tax rates and income brackets
- Standard deduction amounts and itemized deduction considerations
- Credits and deductions, including adoption costs and assistance, Lifetime Learning Credit, Earned Income Tax Credit, educators’ expenses, interest on education loans and transportation fringe benefits
- Medical-related tax provisions, including contributions to a flexible spending account (FSA), health savings account (HSA), medical savings account (MSA), and eligible and eligible long-term care premiums
- Capital gains tax income brackets, estate and gift tax limits, kiddie tax, kiddie tax, and nanny tax
- Alternative Minimum Tax exemption amounts and One Big Beautiful Bill Act changes for 2026, along with the Social Security wage base increase amount and other pay-related taxes
- International worker tax issues, including foreign income and housing exclusions
- Retirement (e.g., IRA etc.) and pension plan contribution limits
- Penalties, for both individuals and tax pros, for things such as failure to file a timely 1040 or certain information returns
- Standard mileage deduction rates (This is the final component, since the IRS issues these adjustments and later in the year.)
Again, I know all y’all tax geeks want as much tax information as soon as possible. I get it. So, I really appreciate your patience when comes to my extended presentation of the 2026 tax inflation info.
