Recently, the IRS announced the 2026 tax year annual inflation adjustments for a number of tax provisions, including tax rate schedules and other tax changes. Revenue Procedure 2025-32 provides further details about these annual adjustments.
Many of the particular changes are due to the One Big Beautiful Bill Act (“OBBBA”). According to the Revenue Procedure, the following expat-related adjustments will apply to the 2026 tax year:
Inflation Adjustments for Foreign Tax Items
Foreign earned income exclusion. If you are able to establish that your tax home is outside the U.S. and can satisfy either the bona fide residence test or the physical presence test, you can exclude from income a portion of your income earned overseas. The foreign earned income exclusion amount will be $132,900 in 2026 ($130,000 in 2025).
Foreign gift reporting. For gifts from a nonresident alien individual or foreign estate, reporting on Form 3520 is required only if the aggregate amount of gifts from that person exceeds $100,000 during the tax year. This number does not generally adjust for inflation. However, for gifts from foreign corporations and foreign partnerships, the reporting threshold amount will be $20,573 in 2026 ($20,116 for 2025).
Exit tax for renouncers. One of the significant tax implications of renouncing one’s U.S. citizenship is the so-called “exit tax,” which is triggered if any of the below are true:
- You fail to certify to the IRS that you have complied with all U.S. federal tax obligations for the 5 years preceding the date of your expatriation.
- Your net worth is $2 million or more on the date of your expatriation.
- Your average annual net income tax for the 5 years ending before the date of expatriation is more than a specified amount that is adjusted for inflation. For 2026, this amount will be $211,000 ($206,000 for 2025).
Also, for 2026, the amount that would otherwise be includible in the gross income of any individual subject to the exit tax will become reducible by $910,000 ($890,000 for 2025).
Inflation Adjustments for Other Tax Items
The standard deduction. While this is an item with broader scope than the international tax domain, the standard deduction often becomes relevant for U.S. expats without sufficient foreign exclusion or foreign tax credits to fully reduce their U.S. tax liability. The basic standard deduction for 2026 will be:
Joint return - $32,200
Single - $16,100
Head of household - $24,150
Married filing separate - $16,100
Lifetime estate and gift tax exclusion amount. For gifts made and estates of decedents dying in 2026, the exclusion amount will be $15,000,000. This amount was reset as a result of the OBBBA, but will continue to be adjusted moving forward for inflation.
Gift tax annual exclusion. For gifts made in 2026, the gift tax annual exclusion will be $19,000 (the same as 2025). The annual exclusion for gifts to noncitizen spouses will be $194,000 in 2026 ($190,000 for 2025).
