IRS lifts the Section 179 expensing limit to $2.64 million and the standard deduction to $33,200 for 2027

The Internal Revenue Service on Thursday released its tax year 2027 inflation adjustments (release IR-2026-133, details in Revenue Procedure 2026-35), covering almost 70 provisions. They generally apply to returns filed in 2028. CNBC and MarketWatch led with the personal brackets. We went to the IRS release for the business lines.

The business numbers

The Section 179 cap rises $80,000, or 3.1%. The 2026 transportation fringe and FSA figures are the IRS's stated increases ($10 and $100) taken off the 2027 amounts. The release gives no phase-out threshold for Section 179, so we do not state one.

The number behind the number

The expensing cap is the headline, but it is a ceiling few small firms come near. The cap only matters to a business buying well over $2.5 million of qualifying equipment in a year. The figure that reaches a typical owner is the SUV limit, up $1,100 to $33,100. A contractor or an owner-operator buying a heavy SUV for the business is capped at that amount of first-year expensing, whatever the vehicle costs. The IRS release does not say how the limit interacts with a vehicle's weight rating, so check that with a tax professional before buying.

The increase in the employer childcare credit is the less obvious one. The IRS says the Working Families Tax Cuts law significantly enhanced it, and an eligible small business can claim up to $619,132.40 in 2027. The release does not define "eligible small business" in its summary, so read Revenue Procedure 2026-35 before planning around it.

Who it actually hits

• A construction or trucking owner replacing equipment: the cap is large enough for almost every purchase, so the planning question is timing, not the limit.

  141,913 independent construction and contractors are listed on CheckThisBiz, a directory of 7,704,724 independent US businesses, including 12,896 in TX, 12,642 in CA, 11,414 in FL. Chains and franchises are excluded from that count, so these are the owner-operated businesses that actually apply for funding.

  24,679 independent trucking and freight are listed on CheckThisBiz, a directory of 7,704,724 independent US businesses, including 2,868 in TX, 2,828 in CA, 1,916 in FL. Chains and franchises are excluded from that count, so these are the owner-operated businesses that actually apply for funding.

• A repair shop or salon owner filing as a sole proprietor: the personal changes matter most. The standard deduction rises to $16,600 for single filers (from $16,100, per CNBC) and $33,200 for married couples filing jointly, up $1,000. At the 22% rate that is $110 less tax for a single filer and $220 for a joint return. At 24% it is $120 and $240. We did these sums from the IRS amounts.

  224,738 independent auto repair shops are listed on CheckThisBiz, a directory of 7,704,724 independent US businesses, including 26,287 in CA, 22,628 in TX, 14,123 in FL. Chains and franchises are excluded from that count, so these are the owner-operated businesses that actually apply for funding.

• An employer with a transit or health plan: workers can set aside $350 a month for transit or parking and $3,500 in a health FSA. Payroll settings and open enrollment materials need the new limits.

Where the brackets start

The top rate stays at 37%, starting above $661,375 for single filers and $793,650 for joint filers. The other thresholds, single filers first: 35% above $264,550 ($529,100 joint), 32% above $208,325 ($416,650), 24% above $109,125 ($218,250), 22% above $52,025 ($104,050) and 12% above $12,800 ($25,600). Single filers under $12,800 pay 10%. CNBC reports that the 0% long-term capital gains rate applies to taxable income up to $51,050 for single filers and $102,100 for joint filers; we did not verify those two figures in the IRS release.

The adjustments come with consumer prices rising. CNBC cites the Bureau of Labor Statistics at 3.7% year over year in September, up from 3.4% in August. Our earlier look at the same price data is in the 2027 Social Security COLA story.

The practical step for an owner is small: update payroll limits, ask your accountant whether a planned equipment or vehicle purchase is better in 2026 or 2027, and leave the rest alone. Nothing here changes what you owe for 2026.

Sources: Internal Revenue Service, IR-2026-133; CNBC; MarketWatch. Dollar-saving examples are Chronicle arithmetic. This is general information, not tax advice.