The IRS Announces New Tax Brackets and Deductions for 2026—and First-Time Buyers Stand To Benefit

The IRS has raised 2026 tax brackets to account for inflation, boosting take-home pay for millions. Here’s what it means for first-timers.

As summer fades, the housing market is shifting too—and this time, the momentum may be tilting toward buyers. For the first time in years, conditions are aligning to give first-time homebuyers a better shot. Seven major metros are now officially in a buyer's market, according to the latest monthly housing market trends report from Realtor.com®. An additional 23 are perfectly balanced, meaning that while buyers don’t necessarily have the upper hand, they certainly have more leverage than they’ve had in years. And now, another factor may be tipping the scales in their favor: The IRS has unveiled new tax brackets for 2026. In addition to the new brackets, the standard deduction will jump to $32,200 for married couples filing jointly (up from $31,500) and $16,100 for single taxpayers (up from $15,750). Inflation adjustments mean higher income thresholds and deductions, possibly lowering the effective taxes for millions. That boost to take-home pay could go a long way toward offsetting the rising cost of living and give buyers the wiggle room they need in their budget to finally break into the market. Your income isn't taxed at a flat rate. Instead, your earnings are divided into brackets, and each portion of your income is taxed at its own rate. You’ll often hear terms like "marginal" or “effective” tax rates when breaking down income tax to help capture the cumulative effects of these brackets. While your marginal tax rate is the rate that applies to the last dollar you earn, your effective tax rate is the overall percentage of your income that goes to the IRS. For example, let’s assume you’re filing taxes in 2025 as a single filer on a $100,000 salary. The first $11,925 of your income would be taxed at 10%, your income from $11,926 to $48,475 would be taxed at 12%, and the rest would be taxed at 22%. Your marginal tax rate is 22%, but your effective tax rate is closer to 16%. If you earned $200,000, the same structure applies, but the income from $103,351 to $197,300 would be taxed at 24%, and only the final few thousand, from $197,301 to $200,000, would be taxed at 32%. In this case, your marginal tax rate would be 32%, while your effective tax rate would be just over 20%. As you can see, most households’ effective rate is much lower than their top bracket. That means inflation adjustments don’t just help at the margins—they reduce the overall share of income going to taxes, leaving buyers with more room in their budgets for mortgages and closing costs.