Every fall the IRS publishes a long document that almost nobody reads cover to cover. This year it came out on Thursday, November 5, as Revenue Procedure 2026-35, and it adjusts almost 70 numbers in the tax code for inflation for 2027. Prices rose faster this year, so the bump is bigger than the last two years.

Most of the coverage in the US will be about tax brackets and the standard deduction. For Americans living in Israel, those are not the numbers that move the needle. Four numbers in that document shape what a US citizen family living here actually pays or gets back, and I want to walk through each one.

Then there is the other list. The numbers that were not in the document at all, because Congress never told the IRS to adjust them. Three of them land almost entirely on Americans abroad, and the gap between what moves every year and what stays frozen gets wider every November. That part is worth being a little annoyed about.

All figures below are for the 2027 tax year, meaning income earned in 2027 and returns filed in 2028.

Key Items

  • The maximum child tax credit goes to $2,300 per child, and the refundable part rises to $1,800.
  • The foreign earned income exclusion goes to $137,300 per person.
  • The estate and lifetime gift exemption goes to $15,480,000, the first year it moves with inflation.
  • The annual gift exclusion goes to $20,000, and gifts to a spouse who is not a US citizen go to $201,000.
  • The 3.8% NIIT still starts at $200,000 single, $250,000 joint and $125,000 married filing separately, exactly where it started in 2013.
  • Form 8938 still starts at $200,000 for a single filer living abroad, exactly where it started in 2011.
  • The FBAR still starts at $10,000, where it has been since the 1970s, while the non-willful penalty has grown to $16,536.

What Went Up for 2027

The Child Tax Credit (the one every Israeli mistakenly calls kitzbat yiladim)

The child tax credit goes to $2,300 per child for 2027, up from $2,200. The piece that matters in Israel is the refundable part, which goes to $1,800 per child, up from $1,700.

Refundable means the IRS sends you the money even if you owe no US tax, which describes almost every American family here living on Israeli salaries. A family with four kids under 17 can receive up to $7,200 a year. To get all of it you need earned income, because the refund is 15% of earned income above $2,500. For four kids that works out to about $50,500 of earned income before the full credit is unlocked.

The catch is the foreign earned income exclusion. If you claim it on Form 2555, you cannot claim the refundable credit at all. Families paying Israeli tax normally use foreign tax credits instead, which keeps the salary counted as earned income and keeps the refund. The new Israeli exemption for olim changes that math, because with no Israeli tax there is nothing to credit. I wrote about that trade off in How the New Israeli Tax Exemption Can Actually Raise Your U.S. Tax Bill.

Two smaller points. Since 2025 the parent claiming the credit needs a work eligible Social Security number, or on a joint return at least one spouse does. And each child needs a Social Security number issued before the return is due. Plenty of kids born here have a US passport and a CRBA and never got the Social Security number. That is fixable, but it takes months, so start now if one of yours is missing it.

Also this year, one of my sons turned 17. So naturally I told him he has to find a new way to pull his weight in the family and get me my $1,800.

The Foreign Earned Income Exclusion

The FEIE goes to $137,300 per person for 2027, up from $132,900. A married couple where both spouses work and qualify can exclude up to $274,600 between them.

For years most Americans in Israel did not use it, unless they had a US CPA who didn't know the better way to file and took the easiest, most common route. Israeli tax rates are high enough that foreign tax credits usually wipe out the US tax on salary, and credits keep the child tax credit refund intact. The exclusion became interesting again because of the new olim exemption. Zero Israeli tax means zero credits, and the exclusion is what stops the US from taxing that salary instead. Make Aliyah Earning $185,000 & Pay Zero Income Tax in Both the U.S. and Israel walks through how that works, and What Hasn't Changed for Aliyah in 2026 covers the first year trap, where the physical presence test may not be met until well into the following year.

Two things the exclusion does not do. It does not remove self-employment tax, which is a big part of why I wrote Every Reason Being Self-Employed in Israel as a US Citizen Is a Terrible Idea. And the income you exclude still pushes your other income into higher brackets, because the tax on everything else is figured as if the excluded salary were still there.

The Estate Tax Exemption

For someone who dies in 2027, or as we like to say “they reach 120”, the basic exclusion amount is $15,480,000, up from $15,000,000. This is the first year the number moves with inflation since last year's tax law set it at $15,000,000 and made it permanent. A married couple of US citizens can shelter about $30,960,000 between them, as long as a Form 706 gets filed at the first death to carry the unused amount over to the survivor. This also means that if you maximized your estate plan last year, you can now hire a lawyer to help you add another $480K to that trust.

The same exemption covers lifetime gifts. Every gift above the annual exclusion that you report on Form 709 comes off this one number.

And here is the first entry for the second list. The list of things that absurdly don't change year after year. If you are not a US citizen or domiciliary, the exemption on your US assets is $60,000. It was $60,000 in 1988 and it is $60,000 for 2027. It is not in the Revenue Procedure because nothing in the law tells the IRS to touch it. For the Israeli spouse with an investment in US real estate, it is still an issue. I wrote about more details a year ago on the US estate tax for non-US people, and because the numbers don't change, it is still very relevant.

The Annual Gift Exclusions

The annual gift exclusion goes to $20,000 per recipient for 2027, up from $19,000. That is per giver, per recipient, per year. My wife and I could each give each of our six kids $20,000, $240,000 in all, with no gift tax return, as long as each of us gives from our own money. Tuition and medical bills paid directly to the school or the hospital don't count against any of it.

For mixed marriages the number to know is $201,000, up from $194,000. Between two American spouses, gifts are unlimited and tax free. When the receiving spouse is not a US citizen, that unlimited marital deduction disappears and this annual amount replaces it. It is the main tool for moving assets from the American spouse to the Israeli spouse over time, and most couples I meet have never used it. If you want an easy way to calculate if you need to file a gift return, check out our gifting tool.

The other direction has a trap of its own. When the Israeli spouse, or an Israeli parent, gives money to an American, there is usually no US gift tax at all. But once the total from that person and their relatives goes over $100,000 in a year, the American has to file Form 3520 to report it, and missing it can cost up to 25% of the gift. Meaning that if you forget to tell the IRS about that $100K gift you may owe them $25K! That $100,000 has not moved since the IRS set it in the 1990s. The parallel threshold for gifts from foreign companies and partnerships does get adjusted every year, to $21,240 for 2027. Why a Recent Court Ruling Is Important for Americans in Israel to Know About tells the story of a family that learned about this the expensive way.

What Didn't Move, and Should Have

The Revenue Procedure only adjusts what Congress tells it to adjust. Some of the numbers that matter most to Americans abroad were written into the law as flat dollar amounts with no inflation adjustment, and nobody has gone back to fix them. Every year the brackets move up and these stay put, which means every year they reach a little further down into ordinary families.

The NIIT Threshold

The 3.8% net investment income tax applies once your modified AGI goes over $200,000 single, $250,000 married filing jointly, or $125,000 married filing separately. Those numbers came in with the tax in 2013, and the IRS says plainly they are not indexed for inflation. Prices are up something like 40% since then. The tax brackets have moved with them. This threshold has not.

The $125,000 figure is the one I run into most in Israel, because an American married to an Israeli usually files separately. And excluded foreign earned income gets added back for this test, so the FEIE does not keep you under it. A family with a good salary and a rental apartment, or one year with a large stock sale, crosses that line without anyone feeling rich.

Think about all those incredible exit events you hear about in the news over the past year. All those US citizen founders in Israel end up paying more tax in Israel than they owe in the US. Often they end up not needing to pay additional US income tax on that million or billion dollar exit, but that 3.8% NIIT is still there. No amount of Israeli tax can offset it.

It would bother me less if Americans here could credit Israeli tax against it. As of this summer, the Federal Circuit says they can't. I wrote about that in We Just Lost. US Citizens Abroad Can't Offset the 3.8% Net Investment Income Tax with Foreign Taxes.

The Form 8938 Thresholds

Form 8938, the FATCA form, has the same thresholds it had when it first appeared for 2011 returns. A single filer living abroad, or a married person filing separately, files once foreign assets pass $200,000 at year end or $300,000 at any point in the year. A married couple filing jointly files at $400,000 and $600,000. None of those has ever been adjusted.

In 2011 those numbers kept most families in Israel off the form. Fifteen years later, a couple in their forties with a keren pensia, a keren hishtalmut, and some savings can be over the line without owning a single stock. Pension balances grow every year. The threshold doesn't. The form itself is not hard, but missing it carries a $10,000 penalty that is not indexed either, and it can keep the statute of limitations open on the return.

The FBAR and the 8938 overlap heavily, but they are separate forms with separate rules, and filing one does not cover the other.

The FBAR Threshold

And then the oldest one. You file an FBAR if all your foreign accounts together go over $10,000 at any point in the year. That threshold goes back to the 1970s. In today's money it would be somewhere around $80,000. Here it catches basically every American with an Israeli bank account, a pension from work, and a salary deposited into it.

What makes it absurd is the other half. The penalty for a non-willful violation, which is the honest mistake, was set at $10,000 in 2004. Unlike the threshold, the penalty is adjusted for inflation, and it now stands at $16,536 per annual report. The filing threshold and the original penalty were the same number. Only one of them has kept up with inflation.

One footnote. The penalty did not go up in 2026, because last fall's government shutdown meant the October 2025 inflation data was never published, and OMB cancelled the 2026 adjustment for every federal agency. So $16,536 is still the number today. I would not count on that pause lasting, and it still doesn't seem like something to thank them for. Thank you for not increasing the penalty higher than $16.5K because someone forgot to file their $10K threshold FBAR?

The Supreme Court did help in 2023, holding in Bittner that the non-willful penalty applies per report and not per account. That matters a lot to people here with eight accounts across three banks. But the IRS has also quietly stopped promising leniency on late FBARs, which I covered in The IRS Quietly Signaled We Are About to See More FBAR Penalties.

The Pattern

Put the two lists side by side and the pattern is hard to miss. The numbers that give something to taxpayers mostly move with inflation. The numbers that pull people into a tax or a reporting requirement mostly don't. For families in the US that is a minor irritation. For Americans in Israel, who have foreign accounts by definition and foreign pensions by default, the frozen numbers decide how much paperwork they file and how much penalty exposure they carry.

None of this is going to fix itself. What you can do is plan around it, and check which side of each line you are on for 2027 now rather than when the return is due. If you want help working that out, reach out to me directly. And if one of these frozen numbers caught you by surprise the first time you ran into it, I would like to hear which one.

General education, not advice on anyone's particular facts.