This notice provides transitional guidance with respect to returns relating to certain interest on specified passenger vehicle loans received in a trade or business from an individual required to be filed under section 6050AA. Section 70203 of Public Law 119-21, commonly known as the One, Big, Beautiful Bill Act, added new section 6050AA to the Code, imposing information reporting obligations on recipients of applicable passenger vehicle loan interest received in a trade or business from individuals. The notice provides that recipients of such interest may satisfy the reporting obligations under section 6050AA for such interest received on a specified passenger vehicle loan in 2025 by making a statement available to the individual indicating the total amount of interest received in calendar year 2025 on a specified passenger vehicle loan. The notice also provides that the IRS will not impose penalties under sections 6721 and 6722 on recipients of interest that have satisfied the reporting obligations under section 6050AA for calendar year 2025 as described in this notice.

This revenue procedure modifies certain sections of Rev. Proc. 2024-40, 2024-45 I.R.B. 1100, to reflect the amendments to the Internal Revenue Code (Code) by Public Law 119-21, 139 Stat. 72 (July 4, 2025), commonly known as the One, Big, Beautiful Bill Act. This revenue procedure sets forth inflation-adjusted items for 2026 for various Code provisions as in effect on October 9, 2025.

26 CFR 601.602: Tax forms and instructions.

(Also Part I, §§ 1, 23, 24, 32, 42, 45R, 55, 59, 62, 63, 125, 132(f), 135, 137, 146, 147, 148, 152, 179, 179D, 199A, 213, 220, 221, 448, 461, 512, 513, 529A, 642, 831, 877, 877A, 911, 1274A, 2032A, 2503, 2523, 2801, 4161, 4261, 4611, 6033, 6039F, 6323, 6334, 6601, 6651, 6652, 6695, 6698, 6699, 6721, 6722, 6726, 7345, 7430, 7702B, 9831; 1.148-5.)

Sections 4375 and 4376 impose a fee on issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans to help fund the Patient-Centered Outcomes Research Trust Fund (PCORTF). The PCORTF fee is determined by multiplying the applicable dollar amount for that year by the average number of lives covered during the year. The applicable dollar amount is based on increases in the projected per capita amount of National Health Expenditures, as most recently released by HHS. Notice 2024-83 provided that the adjusted applicable dollar amount for policy years and plan years ending on or after October 1, 2024, and before October 1, 2025, is $3.47. This notice provides that the adjusted applicable dollar amount that applies for determining the PCORTF fee for policy years and plan years ending on or after October 1, 2025, and before October 1, 2026, is $3.84. This amount has been determined by Treasury economists using the percentage increase in the projected per capita amount of National Health Expenditures published by HHS in June 2025 (Table 1, line 35) and the adjustment, as determined by Treasury economists, for year to year variations.

Federal rates; adjusted federal rates; adjusted federal long-term rate, and the long-term tax exempt rate. For purposes of sections 382, 1274, 1288, 7872 and other sections of the Code, tables set forth the rates for November 2025.

(Also Sections 42, 280G, 382, 467, 468, 482, 483, 1288, 7520, 7872.)

This revenue ruling provides various prescribed rates for federal income tax purposes for November 2025 (the current month). Table 1 contains the short-term, mid-term, and long-term applicable federal rates (AFR) for the current month for purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the short-term, mid-term, and long-term adjusted applicable federal rates (adjusted AFR) for the current month for purposes of section 1288(b). Table 3 sets forth the adjusted federal long-term rate and the long-term tax-exempt rate described in section 382(f). Table 4 contains the appropriate percentages for determining the low-income housing credit described in section 42(b)(1) for buildings placed in service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July 30, 2008, shall not be less than 9%. Finally, Table 5 contains the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of section 7520.

       

The applicable federal short-term, mid-term, and long-term rates are set forth for the month of November 2025. See Rev. Rul. 2025-21, page 690.

The applicable federal short-term, mid-term, and long-term rates are set forth for the month of November 2025. See Rev. Rul. 2025-21 page 690.

The adjusted applicable federal long-term rate is set forth for the month of November 2025. See Rev. Rul. 2025-21, page 690.

The applicable federal short-term, mid-term, and long-term rates are set forth for the month of November 2025. See Rev. Rul. 2025-21, page 690.

The applicable federal short-term rates are set forth for the month of November 2025. See Rev. Rul. 2025-21, page 690.

The applicable federal short-term, mid-term, and long-term rates are set forth for the month of November 2025. See Rev. Rul. 2025-21, page 690.

The applicable federal short-term, mid-term, and long-term rates are set forth for the month of November 2025. See Rev. Rul. 2025-21, page 690.

The adjusted applicable federal short-term, mid-term, and long-term rates are set forth for the month of November 2025. See Rev. Rul. 2025-21, page 690.

The applicable federal mid-term rates are set forth for the month of November 2025. See Rev. Rul. 2025-21, page 690.

The applicable federal short-term, mid-term, and long-term rates are set forth for the month of November 2025. See Rev. Rul. 2025-21, page 690.

This notice provides transitional guidance with respect to returns relating to certain interest on specified passenger vehicle loans received in a trade or business from individuals, required to be filed under new section 6050AA of the Internal Revenue Code (Code)¹ as enacted by section 70203 of Public Law 119-21, 139 Stat. 72, 176 (July 4, 2025), commonly known as the One, Big, Beautiful Bill Act (OBBBA). To ensure efficient administration of this new provision, section 3 of this notice provides that recipients of such interest may satisfy the reporting obligations under section 6050AA for such interest received on a specified passenger vehicle loan in 2025 by making a statement available to the individual indicating the total amount of interest received in calendar year 2025 on a specified passenger vehicle loan.

.01 New Reporting Under Sections 163(h)(4) and 6050AA

As amended by the OBBBA, section 163(h)(4) provides that the term “personal interest” (as defined in section 163(h)(2)) does not include “qualified passenger vehicle loan interest” (as defined in section 163(h)(4)(B)) (QPVLI) for taxable years beginning after December 31, 2024, and before January 1, 2029. Thus, section 163(h)(4) permits a deduction for QPVLI under section 163(a) for those taxable years.

Section 6050AA requires information reporting with respect to interest received on a specified passenger vehicle loan. This interest may be QPVLI that is deductible under section 163(a).

Under section 6050AA(a), any person engaged in a trade or business, referred to herein as the “recipient,” who, in the course of that trade or business, receives from any individual interest aggregating $600 or more for any calendar year on a specified passenger vehicle loan, must file an information return reporting the receipt of interest. A “specified passenger vehicle loan” is indebtedness described in section 163(h)(4)(B). That is, it is indebtedness incurred by the taxpayer during the taxable year and after December 31, 2024, for the purchase of, and that is secured by a first lien on, an applicable passenger vehicle for personal use. The term “applicable passenger vehicle” is defined in section 163(h)(4)(D).

Section 6050AA(b) provides that the information return filed by the recipient must be in the form prescribed by the Secretary of the Treasury or the Secretary’s delegate (Secretary) and must contain: (A) the name and address of the individual from whom the interest was received; (B) the amount of interest received for the calendar year; (C) the amount of outstanding principal on the specified passenger vehicle loan as of the beginning of such calendar year; (D) the date of origination of such loan; (E) the year, make, model, and vehicle identification number of the applicable passenger vehicle which secures such loan (or such other description of such vehicle as the Secretary may prescribe); and (F) such other information as the Secretary may prescribe.

Section 6050AA(c) provides that every person required to make an information return under section 6050AA(a) must also furnish to each individual whose name is required to be included in the return a written statement showing the name, address, and phone number of the information contact of the recipient, and the information required to be included in the information return under section 6050AA(b)(2)(B) through (F). Section 6050AA(c) also provides the written statement must be furnished on or before January 31 of the year following the calendar year for which the return was required to be made.

.02 Penalties Under Sections 6721 and 6722

Section 6721 imposes a penalty for any failure to file an information return on or before the required filing date, and for any failure to include all the information required to be shown on a return or the inclusion of incorrect information.

Section 6722 imposes a penalty for any failure to furnish a payee statement on or before the required furnishing date to the person to whom such statement is required to be furnished, and for any failure to include all the information required to be shown on a payee statement or the inclusion of incorrect information.

Section 6724(a) provides that no penalty may be imposed under sections 6721 and 6722 if it is shown that any failure was due to reasonable cause and not willful neglect. Section 6724(d)(1)(B)(xxix) defines an “information return” for purposes of section 6721 as including a return required by section 6050AA(a). Under section 6724(d)(2)(MM), a payee statement is defined for purposes of section 6722 as including the statement required by section 6050AA(c).

The OBBBA was signed into law on July 4, 2025. Section 163(h)(4), as amended, and new section 6050AA apply to indebtedness incurred after December 31, 2024. This section 3 provides transitional guidance regarding section 6050AA for a taxable year beginning after December 31, 2024, and ending on or before December 31, 2025. The transitional guidance provided in this section does not affect or delay the applicability of section 163(h)(4).

The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) understand that recipients may need additional time to make the necessary changes to their systems to comply with their new information reporting responsibilities under section 6050AA. In addition, the IRS needs additional time to make necessary programming and form updates to implement section 6050AA. The Treasury Department and the IRS are also aware that individuals need information on how much interest they paid or accrued in 2025 in order to determine the amount of interest that may be deductible as QPVLI on their individual income tax returns for the 2025 taxable year.

Accordingly, the Treasury Department and the IRS are providing transitional guidance with respect to the reporting obligations under section 6050AA with regard to interest that a recipient received on a specified passenger vehicle loan in calendar year 2025. As described in this transitional guidance, the recipient may satisfy the reporting obligations under section 6050AA for interest received in calendar year 2025 on a specified passenger vehicle loan by making a statement available to the individual on or before January 31, 2026, indicating the total amount of interest received in calendar year 2025 on a specified passenger vehicle loan. The interest recipient can make this statement available to the individual via, for example, an online account portal that the individual can easily access, a regular monthly statement, an annual statement that is provided to the individual, or by other similar means designed to provide accurate information to the individual regarding the total amount of interest received in calendar year 2025 on a specified passenger vehicle loan. In addition, the IRS will not impose penalties under sections 6721 and 6722 on recipients of interest that have satisfied the reporting obligations under section 6050AA for calendar 2025 as described in this notice.

This notice is effective for returns and statements related to interest received during calendar year 2025 on a specified passenger vehicle loan.

The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) (PRA) generally requires that a Federal agency obtain the approval of the Office of Management and Budget (OMB) before collecting information from the public, whether such collection of information is mandatory, voluntary, or required to obtain or retain a benefit. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the OMB.

The collections of information in this notice are in section 3. The collections of information include recordkeeping requirements that are necessary to ensure taxpayers can determine the amount of specified passenger vehicle loan interest paid or accrued in 2025. The collections will be used by the IRS for tax compliance purposes and by taxpayers to calculate their deduction. The likely respondents are corporations and partnerships.

Estimated number of respondents: 35,800 respondents.

Estimated number of responses: 8,000,000 responses.

Estimated frequency of responses: Annually.

Estimated average time per response: 0.25 hours.

Estimated total annual burden: 2,000,000 total burden hours.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by section 6103 of the Code.

The collection of information contained in this notice has been submitted to the OMB under control number 1545-2334.

The principal author of this notice is the Office of Associate Chief Counsel (Procedure & Administration). For further information regarding this notice contact the office at (202) 317-3400 (not a toll-free call).

¹ Unless otherwise specified, all “section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1).

This notice provides the adjusted applicable dollar amount to be multiplied by the average number of covered lives for purposes of calculating the fee imposed by sections 4375 and 4376 of the Internal Revenue Code for policy years and plan years that end on or after October 1, 2025, and before October 1, 2026.

Section 4375 imposes a fee on the issuer of a specified health insurance policy for each policy year ending after September 30, 2012, and before October 1, 2029. Section 4376 imposes a fee on the plan sponsor of an applicable self-insured health plan for each plan year ending after September 30, 2012, and before October 1, 2029. The fee imposed by sections 4375 and 4376 helps to fund the Patient-Centered Outcomes Research Trust Fund and is calculated using the average number of lives covered under the policy or plan and the applicable dollar amount for that policy year or plan year. Under sections 4375(a) and 4376(a), the applicable dollar amount is $2 for policy and plan years ending on or after October 1, 2013, and before October 1, 2014.¹ See Treas. Reg. §§ 46.4375-1(c)(4) and 46.4376-1(c)(3).

Under sections 4375(d) and 4376(d) and §§ 46.4375-1(c)(4) and 46.4376-1(c)(3), the applicable dollar amount for policy years and plan years ending in any Federal fiscal year beginning on or after October 1, 2014, is increased based on increases in the projected per capita amount of National Health Expenditures.

Specifically, the applicable dollar amount is the sum of—

(i) The applicable dollar amount for the policy year or plan year ending in the previous Federal fiscal year; plus

(ii) The amount equal to the product of—

(A) The applicable dollar amount for the policy year or plan year ending in the previous Federal fiscal year; and

(B) The percentage increase in the projected per capita amount of the National Health Expenditures, as most recently released by the Department of Health and Human Services (HHS) before the beginning of the Federal fiscal year.

Notice 2024–83, 2024–49 IRB 1206, provides that the adjusted applicable dollar amount for policy years and plan years that end on or after October 1, 2024, and before October 1, 2025, is $3.47.

The applicable dollar amount that must be used to calculate the fee imposed by sections 4375 and 4376 for policy years and plan years that end on or after October 1, 2025, and before October 1, 2026, is $3.84. The increase from the prior applicable dollar amount is calculated by multiplying $3.47 (which is the adjusted applicable dollar amount for policy years and plan years ending in the previous Federal fiscal year) by the percentage increase of the projected per capita amount of National Health Expenditures published by HHS on June 24, 2025. See: https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/projected; Table 1. The percentage increase is calculated after adjustment to reflect updates to the data used to calculate the prior applicable dollar amount, $3.47, which was based on the per capita amounts of National Health Expenditures for 2023 and 2024 published by HHS on June 10, 2024.

This notice is effective for policy years and plan years ending on or after October 1, 2025, and before October 1, 2026.

The principal author of this notice is the Health and Welfare branch of the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). For further information regarding this notice, contact 202–317–5500 (not a toll-free call).

¹ The applicable dollar amount is $1 for policy and plan years ending before October 1, 2013.

This revenue procedure modifies certain sections of Rev. Proc. 2024-40, 2024-45 I.R.B. 1100, to reflect the amendments to the Internal Revenue Code (Code) by Public Law 119-21, 139 Stat. 72 (July 4, 2025), commonly known as the One, Big, Beautiful Bill Act (OBBBA). This revenue procedure sets forth inflation-adjusted items for 2026 for various Code provisions as in effect on October 9, 2025.

The inflation-adjusted items for the Code sections set forth in section 4 of this revenue procedure are generally determined by reference to § 1(f). To the extent amendments to the Code are enacted for 2025 or 2026 after October 9, 2025, taxpayers should consult additional guidance to determine whether these adjustments remain applicable for 2026.

.01 Section 70101 of the OBBBA amends § 1(j) to make the tax rate tables that were effective for taxable years beginning after December 31, 2017, and before January 1, 2026, permanent. The existing seven tax rates of 10%, 12%, 22%, 24%, 32%, 35%, and 37% remain in effect for individual taxpayers. The existing four tax rates of 10%, 24%, 35%, and 37% remain in effect for estates and trusts.

.02 Section 70402 of the OBBBA adds § 23(a)(4) which provides that so much of the credit allowed under § 23(a)(1) as does not exceed $5,000 is treated as a refundable credit. This amount is adjusted for inflation for taxable years beginning after December 31, 2025.

.03 Section 70104 of the OBBBA amends § 24 to make the increased and expanded child tax credit under § 24(h) that were effective for taxable years beginning after December 31, 2017, and before January 1, 2026, permanent. In addition, the OBBBA amends § 24(h)(2) to provide that the maximum amount of child tax credit is $2,200 for any taxable year beginning in 2025. This amount is adjusted for inflation for taxable years beginning after December 31, 2025.

.04 Section 71305 of the OBBBA removes § 36B(f)(2)(B), which limited the tax increase from excess advance payments for certain households, effective for taxable years beginning after December 31, 2025. Accordingly, the inflation adjustment to § 36B(f)(2)(B) is removed from this revenue procedure.

.05 Section 70422(a) of the OBBBA amends § 42(h)(3)(I) to increase the amount used under § 42(h)(3)(C)(ii) to calculate the State housing credit ceiling for calendar years beginning after December 31, 2025.

.06 Section 70401 of the OBBBA amends § 45F to increase the amount of employer provided childcare credit and provide for adjustment of the maximum amount of the allowable credit for inflation. Section 70401(b) of the OBBBA amends § 45F(b)(2) by increasing the maximum credit amounts to $500,000 ($600,000 if the employer is an eligible small business) for taxable years beginning after December 31, 2025. These amounts will be adjusted for inflation for taxable years beginning after December 31, 2026.

.07 Section 70107 of the OBBBA amends § 55(d)(4) to make the temporary increases of the exemption amounts and the phaseout threshold amounts that were effective for taxable years beginning after December 31, 2017, and before January 1, 2026, permanent. Section 55(d)(4)(B) as amended provides that the $1,000,000 amount described in § 55(d)(4)(A)(ii)(I) is not adjusted for inflation for any taxable year beginning before January 1, 2027.

.08 Section 70102 of the OBBBA amends § 63(c)(7) to make the temporary increases of the basic standard deduction amounts provided in § 63(c)(2) that were effective for taxable years beginning after December 31, 2017, and before January 1, 2026, permanent, and further increased the base amounts. As a result, § 63(c)(7) as amended by the OBBBA provides that, for taxable years beginning after December 31, 2024, the basic standard deduction amounts provided in § 63(c)(2) are increased to $15,750 for single individuals and married individuals filing separate returns; $23,625 for heads of households; and $31,500 for married individuals filing a joint return and surviving spouses. These amounts are adjusted for inflation for taxable years beginning after 2025. See section 3 of this revenue procedure for removal of section 2.15(1) of Rev. Proc. 2024-40.

.09 Section 70412 of the OBBBA amends § 127(c)(1)(B) to make the temporary expansion of the term “educational assistance” to include employer payments of principal or interest on any qualified education loan made before January 1, 2026, permanent. The maximum exclusion amount of $5,250 will be adjusted for inflation for taxable years beginning after 2026.

.10 Section 70306 of the OBBBA amends § 179 by increasing the maximum amount a taxpayer may expense under § 179(b)(1) and the phaseout threshold amount under § 179(b)(2). The OBBBA amendments to § 179 apply to property placed in service in taxable years beginning after December 31, 2024. Under § 179(b)(1), the maximum amount allowable is $2,500,000. Under § 179(b)(2), the $2,500,000 amount is reduced by the amount by which the cost of § 179 property placed in service during the taxable year exceeds $4,000,000, but not below $0. These amounts are adjusted for inflation for taxable years beginning after December 31, 2025. See section 3 of this revenue procedure for removal of section 2.25 of Rev. Proc. 2024-40.

.11 Section 70507 of the OBBBA terminated § 179D for property the construction of which begins after June 30, 2026.

.12 Section 70105 of the OBBBA amended § 199A(i) to add a minimum deduction of $400. Additionally, a taxpayer will be required to have a minimum of $1,000 of qualified business income to be eligible for the deduction, effective for taxable years beginning after December 31, 2025. The $400 and $1,000 amounts in § 199A(i) will be adjusted for inflation for taxable years beginning after 2026.

.13 Section 70115 of the OBBBA amended § 529A(b)(2)(B)(i) to vary the manner in which the aggregate annual limitation on contributions made after December 31, 2025, is adjusted for inflation from that provided in § 2503(b). Accordingly, the inflation adjustment to the amount under § 529A(b)(2)(B)(i) is separately added to this revenue procedure.

.14 Section 70106 of the OBBBA amends § 2010(c)(3) by increasing the basic exclusion amount to $15,000,000 for calendar year 2026. The basic exclusion amount is a component of the applicable exclusion amount described in § 2010(c)(2) and is used in determining the applicable credit amount against estate tax described in § 2010(c)(1) and the applicable credit amount against gift tax described in § 2505(a)(1). For calendar year 2026, the generation-skipping transfer exemption amount under § 2631(c) is equal to $15,000,000. These numbers are adjusted for inflation for taxable years beginning after December 31, 2026. The basic exclusion amount will be adjusted for inflation for calendar year 2027 and future years.

.15 Section 70433(a) of the OBBBA amends § 6041(a) to increase the threshold amount for reporting payments made in the course of a trade or business. Section 70433(c) and (d) of the OBBBA amends §§ 6041A(a)(2) (requiring reporting for remuneration for services) and 3406(b)(6) (requiring backup withholding for payments reportable under § 6041), respectively, to cross-reference the § 6041(a) threshold. For payments made after December 31, 2025, the base threshold under section 6041(a) is $2,000. This base threshold amount is adjusted for inflation for returns required to be filed in calendar year 2027.

.16 Section 70421(d)(2)(A) of the OBBBA adds § 6726, which, effective for taxable years beginning after July 4, 2025, imposes a penalty for failure to file a return in the time and manner prescribed for a qualified opportunity fund or qualified rural opportunity fund under § 6039K. Section 6726(b) provides for a penalty of $500 per day with a maximum penalty of $10,000 per return ($50,000 if the gross assets of the fund are greater than $10,000,000). Section 6726(c) provides penalties of $2,500 per day with a maximum penalty is $50,000 per return ($250,000 if the gross assets of the fund are greater than $10,000,000), if the failure to file is due to intentional disregard. These amounts are effective for taxable years that begin after the enactment of the OBBBA. These amounts are adjusted for inflation for returns required to be filed in calendar years beginning after 2026.

.01 Removal of Section 2.15(1) of Rev. Proc. 2024-40. Section 63(c)(7) as amended by the OBBBA provides the standard deduction amounts under § 63(c)(2) for any taxable year beginning in 2025 as follows:

 

Accordingly, section 2.15(1) of Rev. Proc. 2024-40 is removed.

.02 Removal of Section 2.25 of Rev. Proc. 2024-40.

(1) Section 179(b)(1) as amended by the OBBBA provides that the maximum amount allowable for expensing under § 179 is $2,500,000 for any taxable year beginning in 2025. Section 179(b)(2) as amended by the OBBBA provides that, for any taxable year beginning in 2025, the $2,500,000 amount is reduced by the amount by which the cost of § 179 property placed in service during the taxable year exceeds $4,000,000, but not below $0. Accordingly, section 2.25 of Rev. Proc. 2024-40 is removed.

(2) Conforming change. The Table of Contents of Rev. Proc. 2024-40 is modified by removing the entry for section 2.25, “Election to Expense Certain Depreciable Assets.”

.01 Tax Rate Tables. For taxable years beginning in 2026, the tax rate tables under § 1 are as follows:

         

.02 Unearned Income of Minor Children Subject to the “Kiddie Tax”. For taxable years beginning in 2026, the amount in § 1(g)(4)(A)(ii)(I), which is used to reduce the net unearned income reported on the child’s return that is subject to the “kiddie tax,” is $1,350. This $1,350 amount is the same as the amount provided in § 63(c)(5)(A), as adjusted for inflation. The same $1,350 amount is used for purposes of § 1(g)(7) to determine whether a parent may elect to include a child’s gross income in the parent’s gross income and to calculate the “kiddie tax.” For example, one of the requirements for the parental election is that a child’s gross income is more than the amount referred to in § 1(g)(4)(A)(ii)(I) but less than 10 times that amount; thus, a child’s gross income for 2026 must be more than $1,350 but less than $13,500.

.03 Maximum Capital Gains Rate (§ 1(h), § 1(j)(5)). For taxable years beginning in 2026, the maximum zero rate amounts and maximum 15 percent rate amounts under § 1(j)(5)(B), as adjusted for inflation, are as follows:

 

.04 Adoption Credit.

(1) Adoption Credit for Children with Special needs. For taxable years beginning in 2026, under § 23(a)(3), the credit allowed for an adoption of a child with special needs is $17,670.

(2) Adoption Credit Limitation. For taxable years beginning in 2026, under § 23(b)(1), the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $17,670. The available adoption credit begins to phase out under § 23(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $265,080 and is completely phased out for taxpayers with modified adjusted gross income of $305,080 or more. See section 4.18 of this revenue procedure for the adjusted items relating to adoption assistance programs.

(3) Refundable Portion. For taxable years beginning in 2026, the amount used in § 23(a)(4) to determine the amount of the credit under § 23 that may be refundable is $5,120.

.05 Child Tax Credit.

(1) Maximum amount of the credit. For taxable years beginning in 2026, the maximum amount of the credit allowed under § 24(a) is $2,200.

(2) Refundable portion. For taxable years beginning in 2026, the amount used in § 24(d)(1)(A) to determine the amount of the credit under § 24 that may be refundable is $1,700.

.06 Earned Income Credit.

(1) In general. For taxable years beginning in 2026, the following amounts are used to determine the earned income credit under § 32(b). The “earned income amount” is the amount of earned income at or above which the maximum amount of the earned income credit is allowed. The “threshold phaseout amount” is the amount of adjusted gross income (or, if greater, earned income) above which the maximum amount of the credit begins to phase out. The “completed phaseout amount” is the amount of adjusted gross income (or, if greater, earned income) at or above which no credit is allowed. The threshold phaseout amounts and the completed phaseout amounts shown in the table below for married taxpayers filing a joint return include the increase provided in § 32(b)(2)(B), as adjusted for inflation for taxable years beginning in 2026. The threshold phaseout amounts and the completed phaseout amounts shown in the table below for taxpayers with all other filing statuses also apply to married taxpayers who are not filing a joint return and satisfy the special rules for separated spouses in § 32(d).

 

The instructions for the Form 1040 series provide tables showing the amount of the earned income credit for each type of taxpayer.

(2) Excessive Investment Income. For taxable years beginning in 2026, the earned income tax credit is not allowed under § 32(i) if the aggregate amount of certain investment income exceeds $12,200.

.07 Rehabilitation Expenditures Treated as Separate New Building. For calendar year 2026, the per low-income unit qualified basis amount under § 42(e)(3)(A)(ii)(II) is $8,700.

.08 Low-Income Housing Credit. For calendar year 2026, the amount used under § 42(h)(3)(C)(ii) to calculate the State housing credit ceiling for the low-income housing credit is the greater of (1) $3.416 multiplied by the State population, or (2) $3,953,600.

.09 Employee Health Insurance Expense of Small Employers. For taxable years beginning in 2026, the dollar amount in effect under § 45R(d)(3)(B) is $34,100. This amount is used under § 45R(c) for limiting the small employer health insurance credit and under § 45R(d)(1)(B) for determining who is an eligible small employer for purposes of the credit.

.10 Exemption Amounts for Alternative Minimum Tax. For taxable years beginning in 2026, the exemption amounts under § 55(d)(1) are:

 

For taxable years beginning in 2026, under § 55(b)(1), the excess taxable income above which the 28 percent tax rate applies is:

 

For taxable years beginning in 2026, the amounts used under § 55(d)(2) to determine the phaseout of the exemption amounts are:

 

.11 Alternative Minimum Tax Exemption for a Child Subject to the “Kiddie Tax.” For taxable years beginning in 2026, for a child to whom the § 1(g) “kiddie tax” applies, the exemption amount under §§ 55(d) and 59(j) for purposes of the alternative minimum tax under § 55 may not exceed the sum of (1) the child’s earned income for the taxable year, plus (2) $9,750.

.12 Certain Expenses of Elementary and Secondary School Teachers. For taxable years beginning in 2026, under § 62(a)(2)(D), the amount of the deduction allowed under § 162 that consists of expenses paid or incurred by an eligible educator in connection with books, supplies (other than nonathletic supplies for courses of instruction in health or physical education), computer equipment (including related software and services) and other equipment, and supplementary materials used by the eligible educator in the classroom is $350.

.13 Transportation Mainline Pipeline Construction Industry Optional Expense Substantiation Rules for Payments to Employees Under Accountable Plans. For calendar year 2026, an eligible employer may pay certain welders and heavy equipment mechanics an amount up to $23 per hour for rig-related expenses that are deemed substantiated under an accountable plan if paid in accordance with Rev. Proc. 2002-41, 2002-1 C.B. 1098. If the employer provides fuel or otherwise reimburses fuel expenses, an amount up to $14 per hour is deemed substantiated if paid in accordance with Rev. Proc. 2002-41.

.14 Standard Deduction.

(1) In general. For taxable years beginning in 2026, the standard deduction amounts under § 63(c)(2) are as follows:

 

(2) Dependent. For taxable years beginning in 2026, the standard deduction amount under § 63(c)(5) for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of (1) $1,350, or (2) the sum of $450 and the individual’s earned income.

(3) Aged or blind. For taxable years beginning in 2026, the additional standard deduction amount under § 63(f) for the aged or the blind is $1,650. The additional standard deduction amount is increased to $2,050 if the individual is also unmarried and not a surviving spouse.

.15 Cafeteria Plans. For taxable years beginning in 2026, the dollar limitation under § 125(i) on voluntary employee salary reductions for contributions to health flexible spending arrangements is $3,400. If the cafeteria plan permits the carryover of unused amounts, the maximum carryover amount is $680.

.16 Qualified Transportation Fringe Benefit. For taxable years beginning in 2026, the monthly limitation under § 132(f)(2)(A) regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass is $340. The monthly limitation under § 132(f)(2)(B) regarding the fringe benefit exclusion amount for qualified parking is $340.

.17 Income from United States Savings Bonds for Taxpayers Who Pay Qualified Higher Education Expenses. For taxable years beginning in 2026, the exclusion under § 135, regarding income from United States savings bonds for taxpayers who pay qualified higher education expenses, begins to phase out for modified adjusted gross income above $152,650 for joint returns and $101,800 for all other returns. The exclusion is completely phased out for modified adjusted gross income of $182,650 or more for joint returns and $116,800 or more for all other returns.

.18 Adoption Assistance Programs. For taxable years beginning in 2026, under § 137(a)(2), the amount that can be excluded from an employee’s gross income for the adoption of a child with special needs is $17,670. For taxable years beginning in 2026, under § 137(b)(1) the maximum amount that can be excluded from an employee’s gross income for the amounts paid or expenses incurred by an employer for qualified adoption expenses furnished pursuant to an adoption assistance program for adoptions by the employee is $17,670. The amount excludable from an employee’s gross income begins to phase out under § 137(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $265,080 and is completely phased out for taxpayers with modified adjusted gross income of $305,080 or more. See section 4.04 of this revenue procedure for the adjusted items relating to the adoption credit.

.19 Private Activity Bonds Volume Cap. For calendar year 2026, the amounts used under § 146(d) to calculate the State ceiling for the volume cap for private activity bonds is the greater of (1) $135 multiplied by the State population, or (2) $397,625,000.

.20 Loan Limits on Agricultural Bonds. For calendar year 2026, the loan limit amount on agricultural bonds under § 147(c)(2)(A) for first-time farmers is $682,700.

.21 General Arbitrage Rebate Rules. For bond years ending in 2026, the amount of the computation credit determined under § 1.148-3(d)(4) of the Income Tax Regulations is $2,170.

.22 Safe Harbor Rules for Broker Commissions on Guaranteed Investment Contracts or Investments Purchased for a Yield Restricted Defeasance Escrow. For calendar year 2026, under § 1.148-5(e)(2)(iii)(B)(1) of the Income Tax Regulations, a broker’s commission or similar fee for the acquisition of a guaranteed investment contract or investments purchased for a yield restricted defeasance escrow is reasonable if (1) the amount of the fee that the issuer treats as a qualified administrative cost does not exceed the lesser of (A) $51,000, and (B) 0.2 percent of the computational base (as defined in § 1.148-5(e)(2)(iii)(B)(2)) or, if more, $5,000; and (2) for any issue, the issuer does not treat more than $145,000 in brokers’ commissions or similar fees as qualified administrative costs for all guaranteed investment contracts and investments for yield restricted defeasance escrows purchased with gross proceeds of the issue.

.23 Gross Income Limitation for a Qualifying Relative. For taxable years beginning in 2026, the exemption amount referred to in § 152(d)(1)(B) is $5,300.

.24 Election to Expense Certain Depreciable Assets. For taxable years beginning in 2026, under § 179(b)(1), the aggregate cost of any § 179 property that a taxpayer elects to treat as an expense cannot exceed $2,560,000 and, under § 179(b)(5)(A), the cost of any sport utility vehicle that may be taken into account under § 179 cannot exceed $32,000. Under § 179(b)(2), the $2,560,000 limitation under § 179(b)(1) is reduced (but not below zero) by the amount by which the cost of § 179 property placed in service during the 2026 taxable year exceeds $4,090,000.

.25 Energy Efficient Commercial Buildings Deduction. For taxable years beginning in 2026, the applicable dollar value used to determine the maximum allowance of the deduction under § 179D(b)(2) is $0.59 increased (but not above $1.19) by $0.02 for each percentage point by which the total annual energy and power costs for the buildings are certified to be reduced by a percentage greater than 25 percent. For taxable years beginning in 2026, the applicable dollar value used to determine the increased deduction amount for certain property under § 179D(b)(3) is $2.97 increased (but not above $5.94) by $0.12 for each percentage point by which the total annual energy and power costs for the building are certified to be reduced by a percentage greater than 25 percent.

.26 Qualified Business Income. For taxable years beginning in 2026, the threshold amounts under § 199A(e)(2) and phase-in range amounts under § 199A(b)(3)(B) and § 199A(d)(3)(A) are:

 

.27 Eligible Long-Term Care Premiums. For taxable years beginning in 2026, the limitations under § 213(d)(10), regarding eligible long-term care premiums includible in the term “medical care” are as follows:

 

.28 Medical Savings Accounts.

(1) Self-only coverage. For taxable years beginning in 2026, the term “high deductible health plan” as defined in § 220(c)(2)(A) means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,900 and not more than $4,400, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $5,850.

(2) Family coverage. For taxable years beginning in 2026, the term “high deductible health plan” means, for family coverage, a health plan that has an annual deductible that is not less than $5,850 and not more than $8,750, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $10,700.

.29 Interest on Education Loans. For taxable years beginning in 2026, the $2,500 maximum deduction for interest paid on qualified education loans under § 221 begins to phase out under § 221(b)(2)(B), as adjusted for inflation, for taxpayers with modified adjusted gross income in excess of $85,000 ($175,000 for joint returns), and is completely phased out for taxpayers with modified adjusted gross income of $100,000 or more ($205,000 or more for joint returns).

.30 Limitation on Use of Cash Method of Accounting. For taxable years beginning in 2026, a corporation or partnership meets the gross receipts test of § 448(c) for any taxable year if the average annual gross receipts of such entity for the 3-taxable-year period ending with the taxable year which precedes such taxable year does not exceed $32,000,000.

.31 Threshold for Excess Business Loss. For taxable years beginning in 2026, in determining a taxpayer’s excess business loss, the amount under § 461(l)(3)(A)(ii)(II) is $256,000 ($512,000 for joint returns).

.32 Treatment of Dues Paid to Agricultural or Horticultural Organizations. For taxable years beginning in 2026, the limitation under § 512(d)(1), regarding the exemption of annual dues required to be paid by a member to an agricultural or horticultural organization, is $212.

.33 Insubstantial Benefit Limitations for Contributions Associated with Charitable Fund-Raising Campaigns.

(1) Low cost article. For taxable years beginning in 2026, for purposes of defining the term “unrelated trade or business” for certain exempt organizations under § 513(h)(2), “low cost articles” are articles costing $13.90 or less.

(2) Other insubstantial benefits. For taxable years beginning in 2026, under § 170, the $5, $25, and $50 guidelines in section 3 of Rev. Proc. 90-12, 1990-1 C.B. 471 (as amplified by Rev. Proc. 92-49, 1992-1 C.B. 987, and modified by Rev. Proc. 92-102, 1992-2 C.B. 579), for the value of insubstantial benefits that may be received by a donor in return for a contribution, without causing the contribution to fail to be fully deductible, are $13.90, $69.50 and $139, respectively.

.34 Aggregate Limitation on Contributions to ABLE Accounts. For taxable years beginning in 2026, $20,000 (instead of instead of the amount under provided in section 4.42(1) of this revenue procedure) is included in the aggregate limitation on contributions to ABLE accounts under § 529A(b)(2)(B)(i).

.35 Special Rules for Credits and Deductions. For taxable years beginning in 2026, the amount of the deduction under § 642(b)(2)(C)(i) is $5,300.

.36 Tax on Insurance Companies Other than Life Insurance Companies. For taxable years beginning in 2026, under § 831(b)(2)(A)(i) the amount of the limit on net written premiums or direct written premiums (whichever is greater) is $2,900,000 to elect the alternative tax for certain small companies under § 831(b)(1) to be taxed only on taxable investment income.

.37 Expatriation to Avoid Tax. For calendar year 2026, under § 877A(g)(1)(A), unless an exception under § 877A(g)(1)(B) applies, an individual is a covered expatriate if the individual’s “average annual net income tax” under § 877(a)(2)(A) for the five taxable years ending before the expatriation date is more than $211,000.

.38 Tax Responsibilities of Expatriation. For taxable years beginning in 2026, the amount that would be includible in the gross income of a covered expatriate by reason of § 877A(a)(1) is reduced (but not below zero) by $910,000 pursuant to § 877A(a)(3).

.39 Foreign Earned Income Exclusion. For taxable years beginning in 2026, the foreign earned income exclusion amount under § 911(b)(2)(D)(i) is $132,900.

.40 Debt Instruments Arising Out of Sales or Exchanges. For calendar year 2026, a qualified debt instrument under § 1274A(b) has stated principal that does not exceed $7,462,600, and a cash method debt instrument under § 1274A(c)(2) has stated principal that does not exceed $5,330,500.

.41 Limitation on Aggregate Decrease in Value of Qualified Real Property in Decedent’s Gross Estate. For an estate of a decedent dying in calendar year 2026, if the executor elects to use the special use valuation method under § 2032A for qualified real property, the aggregate decrease in the value of qualified real property resulting from electing to use § 2032A for purposes of the estate tax cannot exceed $1,460,000.

.42 Annual Exclusion for Gifts and Annual Exception for Covered Gifts and Covered Bequests Received from a Covered Expatriate.

(1) For calendar year 2026, the first $19,000 of gifts to any person (other than gifts of future interests in property) are not included in the total amount of taxable gifts under § 2503 made during that year.

(2) For calendar year 2026, the first $194,000 (instead of the amount provided in paragraph (1) of this section 4.42) of gifts to a spouse who is not a citizen of the United States (other than gifts of future interests in property) are not included in the total amount of taxable gifts under §§ 2503 and 2523(i)(2) made during that year.

(3) The tax imposed under § 2801 on the receipt of covered gifts or covered bequests from a covered expatriate shall apply only to the extent that the value of covered gifts and covered bequests received during calendar year 2026 exceeds $19,000.

.43 Tax on Arrow Shafts. For calendar year 2026, the tax imposed under § 4161(b)(2)(A) on the first sale by the manufacturer, producer, or importer of any shaft of a type used in the manufacture of certain arrows is $0.65 per shaft.

.44 Passenger Air Transportation Excise Tax. For calendar year 2026, the tax under § 4261(b)(1) on the amount paid for each domestic segment of taxable air transportation is $5.30. For calendar year 2026, the tax under § 4261(c)(1) on any amount paid (whether within or without the United States) for any international air transportation, if the transportation begins or ends in the United States, generally is $23.40. Under § 4261(c)(3), however, a lower rate of tax applies under § 4261(c)(1) to a domestic segment beginning or ending in Alaska or Hawaii, and the tax applies only to departures. For calendar year 2026, the rate of tax is $11.70.

.45 Tax on Certain Uses of Crude Oil and Petroleum Products. For calendar year 2026, the tax imposed under § 4611(a) on crude oil received at a United States refinery and petroleum products entered into the United States for consumption, use, or warehousing is $0.27 per barrel.

.46 Reporting Exception for Certain Exempt Organizations with Nondeductible Lobbying Expenditures. For taxable years beginning in 2026, the annual per person, family, or entity dues limitation to qualify for the reporting exception under § 6033(e)(3) (and section 5.05 of Rev. Proc. 98-19, 1998-1 C.B. 547), regarding certain exempt organizations with nondeductible lobbying expenditures, is $147 or less.

.47 Notice of Large Gifts Received from Foreign Persons. For taxable years beginning in 2026, § 6039F authorizes the Secretary of the Treasury or the Secretary’s delegate to require recipients of gifts from certain foreign persons to report these gifts if the aggregate value of gifts received in the taxable year exceeds $20,573.

.48 Persons Against Whom a Federal Tax Lien Is Not Valid. For calendar year 2026, a federal tax lien is not valid against (1) certain purchasers under § 6323(b)(4) who purchased personal property in a casual sale for less than $2,000, or (2) a mechanic’s lienor under § 6323(b)(7) who repaired or improved certain residential property if the contract price with the owner is not more than $10,010.

.49 Property Exempt from Levy. For calendar year 2026, the value of property exempt from levy under § 6334(a)(2) (fuel, provisions, furniture, and other household personal effects, as well as arms for personal use, livestock, and poultry) cannot exceed $11,980. The value of property exempt from levy under § 6334(a)(3) (books and tools necessary for the trade, business, or profession of the taxpayer) cannot exceed $5,990.

.50 Exempt Amount of Wages, Salary, or Other Income. For taxable years beginning in 2026, the dollar amount used to calculate the amount determined under § 6334(d)(4)(B) is $5,300.

.51 Interest on a Certain Portion of the Estate Tax Payable in Installments. For an estate of a decedent dying in calendar year 2026, the dollar amount used to determine the “2-percent portion” (for purposes of calculating interest under § 6601(j)) of the estate tax extended as provided in § 6166 is $1,940,000.

.52 Failure to File Tax Return. In the case of any return required to be filed in 2027, the amount of the addition to tax under § 6651(a) for failure to file an income tax return within 60 days of the due date of such return (determined with regard to any extensions of time for filing) will not be less than the lesser of $535 or 100 percent of the amount required to be shown as tax on such return.

.53 Failure to File Certain Information Returns, Registration Statements, etc. For returns required to be filed in 2027, the penalty amounts under § 6652(c) are:

(1) for failure to file a return required under § 6033(a)(1) (relating to returns by exempt organization) or § 6012(a)(6) (relating to returns by political organizations):

 

(2) for failure to file a return required under § 6034 (relating to returns by certain trust) or § 6043(b) (relating to terminations, etc., of exempt organizations):

 

(3) for failure to file a disclosure required under § 6033(a)(2):

 

.54 Other Assessable Penalties with Respect to the Preparation of Tax Returns for Other Persons. In the case of any failure relating to a return or claim for refund filed in 2027, the penalty amounts under § 6695 are:

 

.55 Failure to File Partnership Return. In the case of any return required to be filed in 2027, the dollar amount used to determine the amount of the penalty under § 6698(b)(1) is $260.

.56 Failure to File S Corporation Return. In the case of any return required to be filed in 2027, the dollar amount used to determine the amount of the penalty under § 6699(b)(1) is $260.

.57 Failure to File Correct Information Returns. In the case of any failure relating to a return required to be filed in 2027, the penalty amounts under § 6721 are:

(1) for persons with average annual gross receipts for the most recent three taxable years of more than $5,000,000, for failure to file correct information returns:

 

(2) for persons with average annual gross receipts for the most recent three taxable years of $5,000,000 or less, for failure to file correct information returns:

 

(3) for failure to file correct information returns due to intentional disregard of the filing requirement (or the correct information reporting requirement):

 

.58 Failure to Furnish Correct Payee Statements. In the case of any failure relating to a statement required to be furnished in 2027, the penalty amounts under § 6722 are:

(1) for persons with average annual gross receipts for the most recent three taxable years of more than $5,000,000, for failure to furnish correct payee statements:

 

(2) for persons with average annual gross receipts for the most recent 3 taxable years of $5,000,000 or less, for failure to furnish correct payee statements:

 

(3) for failure to furnish correct payee statements due to intentional disregard of the requirement to furnish a payee statement (or the correct information reporting requirement):

 

.59 Failure to Comply with Information Reporting Requirements Relating to Qualified Opportunity Funds and Qualified Rural Opportunity Funds. In the case of any return required to be filed in 2027, the penalty amount under § 6726 for failure to file a return in the time and manner prescribed for a qualified opportunity fund or qualified rural opportunity fund under § 6039K is $510 per day with a maximum penalty of $10,000 per return ($51,000 if the gross assets of the fund are greater than $10,230,000). If the failure to file in the time and manner prescribed is due to intentional disregard, then the penalty is $2,550 per day with a maximum penalty is $51,000 per return ($255,000 if the gross assets of the fund are greater than $10,230,000).

.60 Revocation or Denial of Passport in Case of Certain Tax Delinquencies. For calendar year 2026, the amount of a serious delinquent tax debt under § 7345 is $66,000.

.61 Attorney Fee Awards. For fees incurred in calendar year 2026, the attorney fee award limitation under § 7430(c)(1)(B)(iii) is $260 per hour.

.62 Periodic Payments Received Under Qualified Long-Term Care Insurance Contracts or Under Certain Life Insurance Contracts. For calendar year 2026, the stated dollar amount of the per diem limitation under § 7702B(d)(4), regarding periodic payments received under a qualified long-term care insurance contract or periodic payments received under a life insurance contract that are treated as paid by reason of the death of a chronically ill individual, is $430.

.63 Qualified Small Employer Health Reimbursement Arrangement. For taxable years beginning in 2026, to qualify as a qualified small employer health reimbursement arrangement under § 9831(d), the arrangement must provide that the total amount of payments and reimbursements for any year cannot exceed $6,450 ($13,100 for family coverage).

.01 2025 Inflation-Adjusted Items. Section 3 of this revenue procedures applies to taxable years beginning in 2025.

.02 2026 Inflation-Adjusted Items. Except as provided in section 5.03 of this revenue procedure, section 4 of this revenue procedure applies to taxable years beginning in 2026.

.03 Calendar Year Rule. Section 4 of this revenue procedure applies to transactions or events occurring in calendar year 2026 for purposes of sections 4.07 (rehabilitation expenditures treated as separate new building), 4.08 (low-income housing credit), 4.13 (transportation mainline pipeline construction industry optional expense substantiation rules for payments to employees under accountable plans), 4.19 (private activity bonds volume cap), 4.20 (loan limits on agricultural bonds), 4.21 (general arbitrage rebate rules), 4.22 (safe harbor rules for broker commissions on guaranteed investment contracts or investments purchased for a yield restricted defeasance escrow), 4.37 (expatriation to avoid taxes), 4.40 (debt instruments arising out of sales or exchanges), 4.41 (limitation on aggregate decrease in value of qualified real property in decedent’s gross estate), 4.42 (annual exclusion for gifts and annual exception for covered gifts and covered bequests received from a covered expatriate), 4.43 (tax on arrow shafts), 4.443 (passenger air transportation excise tax), 4.45 (tax on certain uses of crude oil and petroleum products), 4.48 (persons against whom a federal tax lien is not valid), 4.49 (property exempt from levy), 4.51 (interest on a certain portion of the estate tax payable in installments), 4.60 (revocation or denial of passport in case of certain tax delinquencies), 4.61 (attorney fee awards), and 4.62 (periodic payments received under qualified long-term care insurance contracts or under certain life insurance contracts) of this revenue procedure.

Rev. Proc. 2024-40 is modified.

The principal author of this revenue procedure is Michael Finn of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this revenue procedure, contact Mr. Finn at (202) 317-4718 (not a toll-free number).