Tax Fairness Act Overhauls All Income Tax Brackets, Changes Inflation Adjustments Starting in 2026

The Bipartisan Tax Fairness Act of 2025 is set to completely replace the federal income tax rate tables for every single filing status—single, married filing jointly, head of household, and even trusts and estates. This isn’t a tweak; it’s a full swap of the tax brackets everyone uses, effective for tax years beginning after December 31, 2025. Beyond replacing the existing tax tables (Section 1 of the Internal Revenue Code), the bill also makes significant, wonky changes to how those brackets are protected from inflation, which is where things get interesting for your budget over the long term.

The Fine Print on Inflation Protection

If you’ve ever wondered why the tax bracket thresholds seem to creep up every year, it’s because the IRS adjusts them for inflation to prevent "bracket creep"—where inflation pushes you into a higher tax bracket even though your buying power hasn’t increased. This bill changes the formula for that annual cost-of-living adjustment. Specifically, it changes the base year used for the calculation from 2016 to 2017. While this sounds like a minor bureaucratic detail, shifting the base year can subtly slow down or speed up how quickly those brackets expand in the future, depending on the inflation rates between those years. It’s a quiet way to adjust how much tax revenue the government collects over time.

The Rounding Rules That Matter

Another key change is the introduction of new rounding rules for these inflation adjustments. For most filers, if the calculated annual increase isn't a perfect multiple of $25, the adjustment is rounded down to the nearest lower multiple of $25. Think of it like this: if the calculation suggests your bracket should expand by $10,045, it only expands by $10,025. This consistent rounding down, while small year-to-year, means taxpayers will never receive the full calculated inflation protection, which effectively works like a tiny, permanent tax increase over the years. However, married couples filing jointly get a slight break: their adjustments are rounded down to the nearest lower multiple of $50, which is slightly more generous than the $25 rule.

What Disappears and Who It Affects

One provision that is explicitly removed by this act is the section dealing with phasing out the "marriage penalty" in the old 15-percent bracket. While the bill replaces all the brackets, removing this provision could signal a shift in how the tax code treats married couples, potentially impacting those who previously benefited from the phase-out mechanism. For those juggling family budgets, removing a provision designed to mitigate the marriage penalty is a detail worth noting, even as the overall tax structure changes. Ultimately, until the new tax tables are revealed, the full impact of this overhaul—including whether it results in lower or higher taxes—remains unknown. What is clear is that the fundamental rules governing how your income is taxed and how those rules keep pace with inflation are being rewritten.