IRS Announces 2026 Inflation Adjustments — What It Means for Americans Abroad

IRS adjusts 2026 tax brackets, deductions, and expat exclusions — changes that could impact how Americans abroad file and save on next year’s returns.

AUSTRALIA, November 3, 2025 /EINPresswire.com/ -- The Internal Revenue Service (IRS) has released its 2026 inflation adjustments, raising federal tax brackets, deductions, and credits to reflect the continued rise in the cost of living. For millions of Americans abroad, these annual tweaks could directly affect how much they owe or save on next year’s US tax return.

“Inflation might not be dramatic, but it hits US expats in real ways,” said Clark Stott at Expat US Tax. “These annual IRS updates are the government’s quiet way of keeping pace, and for Americans overseas, the impact can be bigger than you think.”

1. Tax Brackets and Standard Deductions Move Up
Federal tax brackets are increasing to prevent “bracket creep,” where inflation pushes taxpayers into higher brackets despite unchanged purchasing power.

Announced new standard deduction amounts for tax year 2026 are:
• Married filing jointly: $32,200
• Head of household: $24,150
• Single or married filing separately: $16,100
For Americans abroad who do not itemize, this adjustment can modestly reduce taxable income.

2. FEIE Climbs to $132,900
The Foreign Earned Income Exclusion (FEIE) rises to $132,900 for 2026 (up from $130,000 in 2025). Married couples who both qualify can double that exclusion.

However, the IRS’s residency and physical-presence tests remain strict; even a few days out of compliance can disqualify a filer.

3. Health Savings Accounts (HSAs) Expand

HSA contribution limits also increased:
• Self-only coverage: $4,400
• Family coverage: $8,750

Expats with active U.S. HSAs can still use funds for eligible overseas medical expenses, provided receipts meet U.S. documentation rules.

4. “One Big Beautiful Bill” Brings New Deductions

The One Big Beautiful Bill (OBBB) continues its phased rollout in 2026, introducing:
• An additional $6,000 standard deduction for seniors 65+
• Partial overtime pay deductions for certain middle-income workers

These may apply even to Americans working abroad if their income is U.S.-sourced.

Common Mistakes Expats Make After IRS Updates

Expat US Tax warns that even minor IRS changes can cause major filing errors:
• Using outdated figures from prior tax years or unupdated software
• Mixing FEIE and FTC in the wrong order, reducing future credits
• Ignoring currency conversion accuracy when reporting foreign income

“We often see expats pay more than they need to simply because they filed with last year’s numbers,” Clark explained.

How to Stay Ahead Before April
To avoid surprises next filing season, the firm recommends:

• Reviewing W-4 or estimated payments before December
• Revisiting old expat tax strategy yearly, check for threshold changes and shifts in treaties

Consulting a preparer familiar with U.S.-expat-specific forms such as 2555, 1116, and 8938 for tax filing for year 2026.

About Expat US Tax
Expat US Tax is a global tax firm focused exclusively on helping Americans abroad manage their US tax obligations. With clients in over 150 countries, the firm provides expert, streamlined support for everything from tax returns to FBARs and foreign trusts. Visit www.expatustax.com to learn more.

Clark Stott
Expat US Tax
399173779398
info@expatustax.com
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