Tax Planning: 2027 Free Money!

Morbidly festive Xantolo greetings to all of my tax-planning friends out there. ("Xantolo" is a Day of the Dead celebration that initiates numerous parades, parties and festivities here in the Husteca region of Mexico.)

Anyway, it's time for my annual Free Money! blog post to show you just how much income you can earn before you owe Uncle Sam any federal income tax. 💸

This post will also help you determine your tax liability at the end of the 10% and 12% tax brackets. The point of this post is to remind you just how useful a basic tax plan can be.

Remember, you (not the government) should be the one deciding how much you'll pay in federal income taxes!

(video here)

Free Money!, What's That?

Free Money! refers to the amount of income that:

you can earn before you owe any federal income tax.

FM! represents your 0% tax rate for your federal income taxes (not your state or FICA tax rate).

The FM! calculation for most people consists of two components: 1.) the standard deduction and 2.) the child tax credit. (However, keep in mind that once your adorable child tax credit turns 17, that credit is gone forever.)

Free Money! Components Recap

The standard deduction depends on the filing status of the taxpayer; here are the projected 2027 numbers (based on Bloomberg Tax’s September 11, 2026 projections using approximately 3.2% inflation; official IRS figures typically announced in late October/November—check IRS.gov for confirmation):

• Single: $16,600
• Married Filing Separately: $16,600
• Head of Household: $24,925 (Bloomberg notes IRS may publish $24,950 after rounding)
• Married Filing Jointly: $33,200

The child tax credit provides a tax credit of (projected):

• $2,300 per child (ages 0-16)
• the income value of the credit depends on the taxpayer’s tax bracket (e.g., 0%, 10%, 12%, etc.)

Before I go any further, be forewarned…

Disclaimer: I’m Not a Tax Expert!

Okay, here’s my annual disclaimer. I'm still NOT a CPA, accountant, or tax professional. While I had to take accounting classes for my MBA, I would never say that I had a knack for accounting, taxes, or tax planning.

Like you, I'm a normal person trying to make sense of our infinitely complex U.S. tax code. These 2027 FM! calculations are my best attempt to make informed tax decisions in 2027 using early projections. (If you find any errors in my numbers, please let me know in the comments section. Always verify with official IRS sources or a tax pro.)

2027 vs 2026

Great news! In 2027, the MFJ standard deduction is projected to increase by $1,000 (from $32,200 to $33,200). Here's how our 2027 FM! will compare to our 2026 FM!:

What does this mean for us in 2027? Simple, it means that we will be able to earn $33,200 in 2027 before we owe any federal income tax. Effectively, this is our 0% tax bracket.

Let's say that in 2027 we would like to take more income from our sources of income (pension, IRA accounts, and side hustles), but we don't want to pay a lot of federal income tax. Check out this table to see how much income we could earn with tax bills of $1k, $2k, and $3k:

Wow, take a look at those effective tax rates of 2.31%, 3.76%, and 4.80%! Any of those income scenarios above would be more than enough for us to enjoy a nice lifestyle here in Mexico.

Annual "Eternal Confusion" Note: Because the 10% tax bracket for MFJ is projected at $25,600 for 2027, the calculations are pretty easy:

• For the $1k example, a tax bill of $1,000 results in $10,000 of additional income ($1,000 / .10).
• For the $2k example, a tax bill of $2,000 results in $20,000 of additional income ($2,000 / .10).
• Finally, the tax bill of $3k yields an additional ~$29,267 of income: ($2,560 / .10 = $25,600) + ($440 / .12 ≈ $3,667). (If this tax math confuses you, please don't sweat it because most "normies" struggle with tax calculations. 😉)

Here’s what our 2027 income options look like after taxes:

Here in San Luis Potosi, Mexico those income amounts would go a long way; they would also go very far in Guatemala and Chiapas, Mexico. ( Most FIRE'd frugalistas that I know could make those income amounts go a long way regardless of their location. 😉)

Final Thoughts

Now that we have our 2027 FM! tax numbers (projections!), we are ready to make informed tax decisions for the upcoming tax year. As always, I have included tax tables to help my readers as they devise their own tax plan; see below. Update your own tables with the new standard deductions, $2,300 CTC, and wider 10%/12% brackets**.

Yours in 2027 tax preparedness,

Gerry

Here are the updated tables for 2027:

Single, Married Filing Separately, or Married Filing Jointly with no Children:

Married Filing Jointly with Children:

Head of Household with Children:

Married Filing Separately with Children:

**Key projected 2027 tax bracket widths (MFJ, taxable income):

• 10%: $0 – $25,600
• 12%: $25,601 – $104,050

Sources: Bloomberg Tax 2027 Projected U.S. Tax Rates (Sept 11, 2026); cross-checked with summaries from Taxgirl, PayMetric Labs, and others. These are projections only—the IRS will publish official inflation adjustments in a Revenue Procedure later this fall. Always confirm official numbers before making major decisions.

If you find any errors or have updated official figures, drop them in the comments!