IRS 2026 Tax Changes: What They Mean for Homeownership

🏠 IRS 2026 Tax Changes: What They Mean for Homeownership

October 2025

The IRS has released its 2026 inflation adjustments, updating more than 60 tax provisions that impact everything from income brackets to estate exclusions. These new figures — outlined in IRS Revenue Procedure 2025-32 — include changes tied to recent legislation and inflation indexing.

For homeowners, buyers, and investors, these updates could influence affordability, refinancing opportunities, and long-term planning. Here’s what you need to know as we head into the 2026 tax year.

💵 Higher Standard Deductions Mean Bigger Take-Home Pay

The standard deduction is rising again in 2026:

• $32,200 for married couples filing jointly

• $16,100 for single filers

• $24,150 for heads of household

These larger deductions mean fewer taxpayers will itemize — including those who would normally claim mortgage interest or property tax deductions.

However, the good news is that higher take-home pay can strengthen debt-to-income ratios, helping buyers qualify more easily for mortgages and giving homeowners more flexibility for savings or improvements.

📊 Marginal Tax Brackets Shift Upward

The top federal rate of 37% remains unchanged, applying to incomes above $640,600 (single) and $768,700 (joint).
Other brackets also move slightly higher:

These modest shifts reflect inflation adjustments that may impact mortgage qualification, especially for self-employed borrowers whose adjusted gross income affects credit and deduction eligibility.

🏡 Estate and Gift Tax Updates for High-Value Homeowners

For clients with larger real estate portfolios or estate planning goals:

• Estate tax exclusion: increases to $15 million (up from $13.99M)

• Annual gift exclusion: remains $19,000 per recipient

• Gift to non-U.S. citizen spouse: up to $194,000

This change gives high-net-worth individuals more flexibility when transferring property or establishing trusts tied to real estate assets.

⚖️ Alternative Minimum Tax (AMT) Relief

The AMT exemption rises to:

• $90,100 for single filers

• $140,200 for married couples filing jointly

This reduces the chances that middle- and upper-income homeowners will face AMT consequences from state and local tax (SALT) deductions — a small but welcome change for California property owners.

👶 Expanded Employer-Provided Childcare Credit

Under the Opportunity Building and Business Benefits Act (OBBB), employers can now claim:

• Up to $500,000 in childcare facility credits

• $600,000 for qualifying small businesses

For real estate and mortgage firms, this expansion supports employee retention — and indirectly improves borrowing capacity for working parents.

💳 Everyday Adjustments That Affect Homeowners

Additional 2026 inflation updates include:

• Earned Income Tax Credit (EITC): up to $8,231 for families with 3+ children

• Health FSA limit: $3,400 (with a $680 carryover)

• Transit and parking benefits: up to $340 per month

Each of these adjustments contributes to a bit more breathing room in household budgets — an important factor for mortgage planning and ongoing homeownership costs.

🔍 The Bottom Line

The 2026 IRS updates bring more favorable thresholds, expanded credits, and larger deductions, which could benefit both current homeowners and new buyers.

For many, the result is higher take-home pay, improved affordability, and greater long-term planning flexibility.

If you’re considering a purchase, refinance, or property investment in 2026, understanding how these changes affect your financial picture is key.

👉 HOTT Homes Real Estate is here to help you plan strategically — whether it’s buying your first home, upgrading, or building wealth through real estate.