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2027 Tax Brackets, 401(k) Limits and Benefit Limits: What Employees Should Know
By the Financial Knowledge Content Team ·
Every November the IRS adjusts dozens of tax amounts for inflation. For 2027, employees get higher tax bracket thresholds, a larger standard deduction, a higher 401(k) limit and higher limits on several workplace benefits. Here’s what changed, in plain language, and how HR teams can help employees use it.
What the IRS announced
On November 5, 2026, the IRS released its annual inflation adjustments for tax year 2027 (News Release IR-2026-133 and Revenue Procedure 2026-35). The update covers almost 70 tax provisions, including the income tax brackets, the standard deduction and several workplace benefit limits.
These amounts apply to income earned in 2027, which most people will report on tax returns filed in early 2028. Payroll withholding tables and benefit elections for 2027 are built on them, so they matter to employees well before tax season.
Tip
This article is general education, not tax advice. Employees with questions about their own situation should talk with a qualified tax professional.
2027 federal income tax brackets
The seven federal income tax rates stay the same: 10%, 12%, 22%, 24%, 32%, 35% and 37%. What changes is the income level where each rate starts. For 2027, the thresholds are:
| Rate | Single (taxable income) | Married filing jointly (taxable income) |
|---|---|---|
| 10% | $12,800 or less | $25,600 or less |
| 12% | Over $12,800 | Over $25,600 |
| 22% | Over $52,025 | Over $104,050 |
| 24% | Over $109,125 | Over $218,250 |
| 32% | Over $208,325 | Over $416,650 |
| 35% | Over $264,550 | Over $529,100 |
| 37% | Over $661,375 | Over $793,650 |
Source: IRS News Release IR-2026-133. Head of household and married filing separately thresholds are in Revenue Procedure 2026-35.
How tax brackets really work
One of the most common misunderstandings employees have is that moving into a higher bracket means all of their income is taxed at the higher rate. It doesn’t. The U.S. uses marginal rates: each rate applies only to the slice of taxable income that falls inside that bracket.
So a raise that pushes someone into the 22% bracket means only the dollars above that threshold are taxed at 22%. Everything below is still taxed at 10% and 12%. A raise never lowers take-home pay because of brackets alone.
Inflation adjustments exist to prevent what’s often called bracket creep, where a cost-of-living raise pushes more income into a higher bracket even though buying power hasn’t changed.
2027 standard deduction
Most taxpayers take the standard deduction rather than itemizing. For 2027 it rises to:
| Filing status | 2026 | 2027 |
|---|---|---|
| Married filing jointly | $32,200 | $33,200 |
| Head of household | $24,150 | $24,925 |
| Single or married filing separately | $16,100 | $16,600 |
Personal exemptions remain at $0 for 2027, as they have been since 2018.
2027 workplace benefit limits
Several limits that show up in benefits enrollment also rise for 2027:
| Benefit | 2027 limit |
|---|---|
| Health FSA salary reduction | $3,500 |
| Health FSA carryover (if the plan allows it) | $700 |
| Qualified transit and parking benefits | $350 per month |
| HSA contribution, self-only coverage | $4,500 (announced earlier in 2026) |
| HSA contribution, family coverage | $9,000 (announced earlier in 2026) |
Health FSA and transit amounts come from IR-2026-133. The 2027 HSA limits were published earlier by the IRS in Revenue Procedure 2026-24. Each employer’s plan sets its own rules within these limits, so employees should check their plan documents.
2027 401(k), 403(b), 457 and IRA limits
The IRS announced the 2027 retirement plan limits on November 12, 2026 (News Release IR-2026-136 and Notice 2026-66).
| Limit | 2026 | 2027 |
|---|---|---|
| 401(k), 403(b), governmental 457 and Thrift Savings Plan contributions | $24,500 | $25,500 |
| Catch-up contributions, age 50 and over | $8,000 | $8,500 |
| Higher catch-up contributions, ages 60 to 63 | $11,250 | $11,750 |
| IRA contributions | $7,500 | $7,500 |
| IRA catch-up, age 50 and over | $1,100 | $1,100 |
| SIMPLE plan employee contributions | $17,000 | $17,500 |
That means employees 50 and older can generally contribute up to $34,000 to a 401(k), 403(b) or governmental 457 plan in 2027, and employees ages 60 to 63 up to $37,250.
The income ranges for Roth IRA contributions also rose, to $158,000 to $173,000 for single filers and heads of household, and $250,000 to $260,000 for married couples filing jointly.
Tip
Changes to a 401(k) contribution rate can take a pay period or two to take effect, so December is a natural time to remind employees to review their percentage for 2027.
Tell us about your people
Every workforce is different, and the right program starts with understanding yours. Financial Knowledge provides conflict-free workplace financial education through CFP® professional-led courses, recorded courses and 1:1 coaching, and we work with organizations of every size and budget. We never sell products, so our only goal is helping your employees make confident decisions.
Tell us about your peopleFrequently asked questions
When do the 2027 tax brackets take effect?
They apply to income earned from January 1, 2027, which most people will report on tax returns filed in early 2028. Payroll withholding for 2027 is based on them.
Did the tax rates change for 2027?
No. The seven rates stay at 10%, 12%, 22%, 24%, 32%, 35% and 37%. The income thresholds for each rate increased for inflation.
What is the 2027 standard deduction?
$16,600 for single filers and married filing separately, $24,925 for heads of household and $33,200 for married couples filing jointly.
What is the 2027 health FSA limit?
Employees can contribute up to $3,500 to a health FSA in 2027, and plans that allow a carryover can let up to $700 roll into the next year.
What is the 2027 401(k) contribution limit?
$25,500 for 401(k), 403(b), governmental 457 plans and the Thrift Savings Plan, up from $24,500 in 2026. Employees 50 and older can add a catch-up of $8,500, or $11,750 at ages 60 to 63. The IRA limit stays at $7,500.
Can a workshop help employees understand tax changes?
Yes. An education-only session explains how brackets, deductions and benefit accounts work, without selling products, so employees can make more informed decisions with their own tax professional.
