IRS 2026 tax updates may change refunds and credits for families

The IRS has announced new tax inflation adjustments for 2026.

These changes can affect the amount of federal taxes your family pays at tax time or the amount you receive as a refund.

Eligible families may see increases in the Child Tax Credit and Earned Income Tax Credit in 2026. In addition, the adoption and gift tax credits have also been adjusted for next year.

In Thursday’s announcement, the IRS also increased the numbers for dozens of other provisions, including federal income tax brackets and long-term capital gains brackets.

The IRS announcement comes a day after the agency announced it would furlough nearly half of its employees as the government shutdown continues.

As the IRS said in a statement, President Donald Trump’s “Big and Beautiful Bill,” signed into law in July, increased the child tax credit cap (a tax break for parents of eligible children) to $2,200 starting in 2025. Prior to enactment of this bill, the child tax credit was capped at $2,000 per child.

The child tax credit of up to $2,200 will be available for tax years 2025 and 2026, according to an IRS spokesperson. The basis will be adjusted for inflation in the 2027 tax year, a spokesperson said.

According to the IRS, the refundable portion of the child tax credit for 2026 is $1,700, unchanged from 2025. This represents the amount a family may receive as a tax refund if their tax liability is less than the child tax credit amount.

The Earned Income Tax Credit, a tax cut for low-to-moderate income earners and their families, is scheduled to be adjusted in 2026 based on the taxpayer’s number of children and income.

The Earned Income Tax Credit (EITC) cap increases from $8,046 in tax year 2025 to $8,231 in 2026 for eligible taxpayers with three or more eligible children.

For eligible taxpayers with two children, the EITC limit increases from $7,152 in 2025 to $7,316 in 2026.

For taxpayers with one child, the cap will be $4,427, up from $4,328 in 2025.

For eligible filers without children, the cap increases from $649 in 2025 to $664 in 2026.

To qualify for the tax credit, individuals and families must have adjusted gross income below a certain threshold.

Married couples filing jointly would have an adjusted gross income of $70,224 if they have three or more children, $65,899 if they have two children, $58,863 if they have one child, and $26,820 if they have no children, which would phase out completely.

For other tax filing statuses (single, head of household, widow), the EITC would phase out the tax rate of $62,974 with three or more children, $58,629 with two, $51,593 with one, and $19,540 with no children.

To qualify for the EITC, a taxpayer cannot have more than $12,200 in certain investment income in 2026.

The maximum deduction for qualified adoption expenses increases from $17,280 in 2025 to $17,670 in 2026. The potential refundable deduction will be $5,120 in 2026.

The annual exclusion for gifts in 2026 will be $19,000, which will remain the same from 2025.

The annual exclusion for gifts to a spouse who is not a U.S. citizen will be up to $194,000 in 2026, an increase of $4,000 starting in 2025.