2027 Tax Changes: What You Need to Know

Here is the first thing to know, because it trips up a lot of people. The return you file in early 2027 is your 2026 return. Most of the new tax breaks were already in place for 2025 and 2026, so they show up on the return you are about to file. The changes that take effect on January 1, 2027 are mostly about health coverage and food assistance, not your tax return. This page covers both, in plain language. We also keep a separate page that tracks new 2027 tax changes for Pennsylvania as they emerge: 2027 Tax Changes We Are Monitoring.

Information checked November 14, 2026. Tax law changes, and some of the items below are still being decided in Congress. Check back here for updates.

1. Your 2026 Return, Filed in Early 2027: What Is New

A bigger standard deduction

For 2026, the standard deduction is $16,100 if you file single, $32,200 if you file jointly, and $24,150 if you file as head of household. Most people take the standard deduction, so this is the number that matters most on your return.

A bigger child tax credit

The child tax credit is now $2,200 per child under 17, and up to $1,700 of that is refundable, which means you can get it back even if you owe no tax. One rule to know: the person claiming the credit must have a Social Security number that is valid for work. On a joint return, at least one spouse must have one.

A much higher cap on state and local tax deductions

If you itemize, you can now deduct up to $40,400 in state and local taxes, up from $10,000. The cap starts to shrink once your income goes above $505,000. The cap is scheduled to drop back to $10,000 in 2030, so it is not permanent.

No tax on tips

If you earn tips in a tipped job, you can deduct up to $25,000 of tip income on your return. The deduction starts to shrink above $150,000 of income, or $300,000 for joint filers. This deduction is available for tax years 2025 through 2028.

No tax on overtime

You can deduct up to $12,500 of overtime pay, or $25,000 for joint filers. Only the extra premium pay counts, the part above your regular hourly rate. Like the tips deduction, it starts to shrink above $150,000 of income, or $300,000 for joint filers, and it is available for tax years 2025 through 2028.

No tax on auto loan interest

If you bought a new car for personal use with a loan taken out after December 31, 2024, you can deduct up to $10,000 a year in loan interest. The car must have been assembled in the United States. The deduction shrinks above $100,000 of income, or $200,000 for joint filers, and is gone at $150,000, or $250,000 for joint filers. It is available for tax years 2025 through 2028.

An extra deduction for seniors

If you are 65 or older by the end of the year, you get an extra deduction of $6,000, or $12,000 if both spouses qualify. This is on top of the regular extra standard deduction for being 65. It shrinks above $75,000 of income, or $150,000 for joint filers, and is gone at $175,000, or $250,000 for joint filers. It is available for tax years 2025 through 2028. One thing this law did not do: it did not make Social Security benefits tax free.

Help with child care costs

The child and dependent care credit is stronger for 2026. Families with lower incomes can now get back up to 50 percent of what they spend on child care, on up to $3,000 of expenses for one child or $6,000 for two or more. And if your employer offers a dependent care flexible spending account, you can now set aside up to $7,500 before tax, up from $5,000.

A higher threshold for Form 1099-K

If you sell things online through PayPal, Venmo, Stripe, or a similar service, you will only get a Form 1099-K if you took in more than $20,000 and had more than 200 transactions in the year. Both have to apply. The old plan would have sent a form at just $600. But remember, your income is still taxable whether or not you get a form.

A charitable deduction even if you do not itemize

Starting with your 2026 return, you can deduct up to $1,000 in cash gifts to qualifying charities, or $2,000 for joint filers, even if you take the standard deduction. Cash gifts only. If you do itemize, there is a new rule the other way: only the part of your giving above 0.5 percent of your income counts.

A higher threshold for Forms 1099-NEC and 1099-MISC

If you hire someone or pay a contractor, you only have to issue a 1099-NEC or 1099-MISC for payments of $2,000 or more, up from $600. This applies to payments made after December 31, 2025.

Full bonus depreciation is back for businesses

If your business buys equipment, you can once again deduct the full cost in the year you buy it, for property acquired and placed in service after January 19, 2025. The deduction is 100 percent and permanent.

2. What Changes January 1, 2027

These are the changes that reach beyond your tax return and into daily life. Some of them will be hard on working families, and we want you to see them coming.

Medicaid work requirements

Starting by December 31, 2026, adults ages 19 to 64 who get Medicaid through the expansion program must work, volunteer, train, or go to school at least half time for 80 hours a month, or show earnings of about $580 a month. There are exemptions, including parents caring for children 13 and under, people who are medically frail, and people in treatment for substance use. People who lose Medicaid for not meeting the requirement also cannot get subsidized Marketplace coverage.

Medicaid eligibility checks every six months

For expansion adults, Medicaid eligibility will now be checked every six months instead of once a year, starting with renewals scheduled on or after December 31, 2026. And if you apply for Medicaid, retroactive coverage now only reaches back one month for expansion enrollees, down from three months, or two months for other enrollees.

Food assistance work rules get stricter

The food stamp work rules now apply to able-bodied adults without dependents ages 18 to 64, up from 54. You must work, train, or volunteer at least 80 hours a month, or benefits are limited to three months in any three-year period. Parents are now exempt only if their youngest child is under 14, down from under 18. The exemptions for veterans, people experiencing homelessness, and former foster youth have been removed. These rules have been in effect since November 1, 2025.

Health insurance credits got smaller, and overpayments must be paid back in full

The enhanced Affordable Care Act premium credits expired on December 31, 2025. That was not done by this bill, but the bill did not extend them either. The old rules are back, including the cliff at 400 percent of the federal poverty level, where one dollar over means losing the whole credit. And starting with your 2026 return, if you got too much advance credit during the year, you must now pay back all of it. The old caps on repayment are gone.

Student loan changes

Starting July 1, 2026, there are no new Grad PLUS loans for new borrowers, except for students already in a program who stay continuously enrolled, for up to three more academic years. Graduate students can now borrow up to $20,500 a year in unsubsidized loans, with a $100,000 lifetime limit, or $50,000 a year and a $200,000 lifetime limit for professional programs like law and medicine. The total lifetime limit across all federal loans is $257,500. Parent PLUS loans are now capped at $20,000 a year per student and $65,000 over a lifetime per student. New loans offer only two repayment choices: the new Repayment Assistance Plan, based on your income, or a fixed Tiered Standard Plan.

Clean energy credits have ended

The tax credits for clean energy are over. The credit for buying a new or used electric vehicle ended for vehicles acquired after September 30, 2025. The credits for home energy improvements and for residential solar and batteries ended for work done after December 31, 2025. The credit for a home EV charger ends for chargers installed after June 30, 2026. Nothing new is available in 2027.

A new scholarship tax credit

Starting January 1, 2027, you can get a credit of up to $1,700 a year for cash gifts to organizations that grant scholarships for kindergarten through 12th grade. Students must be in households earning no more than 300 percent of the area median income, and your state must opt in to the program.

3. When These Changes Expire

Not every change on this page lasts. Here are the ones with an end date, so you can plan around them.

The four new deductions end after 2028

No tax on tips, no tax on overtime, no tax on auto loan interest, and the extra $6,000 deduction for seniors are available for tax years 2025 through 2028 only. The 2028 return, filed in early 2029, is the last one that can claim them, unless Congress extends them. Plan as if they end, and treat an extension as a bonus.

The state and local tax cap drops back in 2030

The $40,400 cap on state and local tax deductions rises a little each year through 2029, then drops back to $10,000 in 2030.

Everything else on this page is permanent, as the law stands today

The bigger standard deduction, the $2,200 child tax credit, the charitable deduction for people who do not itemize, full bonus depreciation, and the $20,000 and 200 transaction threshold for Form 1099-K have no expiration date in the law. They keep adjusting for inflation where the law says so. The health coverage, food assistance, and student loan changes also have no expiration date. Congress can change any of this, which is why this page is dated and updated.

4. What to Do Now

You do not have to sort all of this out alone. Here is a short list to start with.

• Gather your 2026 income records now, including W-2s, 1099s, and any tips, overtime, or auto loan interest, so the new deductions are not missed.
• If you get health coverage through the Marketplace, check your 2026 income carefully. Too much advance credit now has to be paid back in full.
• If you or someone in your family gets Medicaid or food assistance, know the new work and check-in rules before January 1, so nothing catches you by surprise.
• If you have student loans, or a child starting graduate or professional school, ask about the new borrowing limits before signing anything.
• If you bought an electric vehicle or made energy improvements to your home in 2025, make sure the credit is claimed on the right return, while it is still available.
• Call us with questions. A short conversation now can keep a small problem from becoming a big one later.