2026 Tax Brackets: Where K-1, REIT and BDC Income Lands

The 2026 brackets, all filing statuses

The tax rate tables are in section 4.01 of Rev. Proc. 2025-32, Tables 1 to 5. Section 3.01 of the same procedure explains why the rates did not change: Pub. L. 119-21 section 70101 amended IRC 1(j) to make the 2018 rate tables permanent, so “the existing seven tax rates” of 10%, 12%, 22%, 24%, 32%, 35% and 37% stay for individuals and four rates (10%, 24%, 35% and 37%) for estates and trusts. Each cell below is the taxable income over which the rate starts.

Source: Rev. Proc. 2025-32 section 4.01, Tables 1 to 4. The procedure states each table as a tax formula by range of taxable income; we show where each rate starts. Estates and trusts (Table 5) reach 24% at $3,300, 35% at $11,700 and 37% at $16,000; see our trust tax brackets page.

The other 2026 numbers that move with the brackets, and the two that do not:

Source: Rev. Proc. 2025-32 sections 4.03, 4.14 and 4.26; IRC 1411(b). The NIIT thresholds are written in the statute and do not change with inflation, which is why the net investment income tax now reaches far more returns than when it started (see our NIIT guide).

Which tax rate each kind of fund income gets

The bracket table lists one set of rates, but a fund investor receives several kinds of income and each one stacks differently. The table maps the usual ones from a BDC, a non-traded REIT and a real estate partnership K-1 to the rule that sets the rate.

Source: IRC 1(h), 199A(b)(1)(B) and (e)(3), 854(b)(1)(B) and 1411(c)(1)(A); Schedule K-1 (Form 1065) instructions, box 9c and code Z; Instructions for Form 8960. Where the table says “in our reading”, the statute does not name the item and the conclusion is ours; a tax professional should confirm it against your Form 1099-DIV and K-1.

Three rules do most of the work. First, a dividend from a regulated investment company, which includes most BDCs, is qualified for the 15% or 20% rate only for “that portion of such dividend reported by the regulated investment company as qualified dividend income” (IRC 854(b)(1)(B)); a BDC whose income is mostly interest has little qualified dividend income to report, so that distribution is taxed at ordinary rates (box 1b of your Form 1099-DIV shows the qualified part). Second, the 20% deduction in IRC 199A(b)(1)(B) is “20 percent of the aggregate amount of the qualified REIT dividends and qualified publicly traded partnership income”; the definition of a qualified REIT dividend excludes capital gain dividends and qualified dividend income (199A(e)(3)), and our section 199A guide shows where it appears on the 1099-DIV. Third, the NIIT counts “interest, dividends, annuities, royalties, and rents” as net investment income unless they come from a trade or business that is not passive (IRC 1411(c)(1)(A)(i)), so all of the income above except a Roth conversion or IRA distribution is exposed once MAGI is over the threshold.

How much room is left in your bracket

Everything below is our arithmetic on Rev. Proc. 2025-32 sections 4.01 and 4.14, with one simplification: all income is ordinary (wages, interest, rent, BDC dividends), the standard deduction is used, and there are no credits, adjustments or state tax. “Room” is how much more ordinary income fits before the next rate starts. A reader with itemized deductions, a 199A deduction on other income or tax-exempt interest has a different taxable-income line; start from line 15 of last year’s Form 1040 and adjust.

Joint return

Single filer

Source: our arithmetic on Rev. Proc. 2025-32 sections 4.01 and 4.14. Taxable income is AGI minus $32,200 for the joint return and $16,100 for the single filer; “room” is the next bracket start minus taxable income.

Two things show up. A joint return has a long 24% bracket, from $211,400 to $403,550 of taxable income, so a couple with $250,000 to $400,000 of AGI has $35,750 to $185,750 of room before 32%. A single filer has almost none of it: the 24% bracket ends at $201,775 and the 32% bracket at $256,225, so a single filer with $200,000 of AGI has $17,875 of room and one with $250,000 has $22,325 before 35%. That is the filing-status difference our widow’s tax penalty page works out for a surviving spouse.

The rate on your next dollar, by type of income

The table puts the pieces together for the next dollar of each type, at ordinary taxable income that already sits at the level shown. The NIIT is added when MAGI (taxable income plus the standard deduction in this table) is over the threshold, which it is for every row; the assumption is that you have at least that much net investment income. The REIT column is the bracket rate times 80% (the 20% deduction), and assumes the deduction is not cut back by the taxable-income limit in IRC 199A(a)(2), which is 20% of taxable income minus net capital gain.

Joint return

Single filer

Source: our arithmetic on Rev. Proc. 2025-32 sections 4.01, 4.03 and 4.14, IRC 1(h)(1), 199A and 1411. Qualified dividends and long-term gain are taxed at 15% below the 20% threshold ($613,700 joint, $545,500 single) and 20% above it; the unrecaptured section 1250 gain is taxed at the lower of the bracket rate and 25%. The 3.8% applies to the lesser of net investment income and the MAGI excess, so it applies in full to the new dollar only once the excess is larger than your net investment income.

The columns diverge for a reason. The bracket rate applies to ordinary income, so a BDC dividend or ordinary K-1 dollar climbs from 27.8% to 40.8% as taxable income rises. The long-term column does not move until the 20% threshold, so in the 35% bracket a qualified dividend is taxed at 18.8% and an ordinary dividend at 38.8%, a 20-point gap that has nothing to do with the size of the payment. The REIT column sits between them because the deduction removes a fifth of the dividend from taxable income. Our capital gains on real estate page has the long-term and 25% layers in detail.

Adding $100,000 of fund income: the tax at each starting point

The same $100,000 of income costs different amounts depending on its type and on where your other income already sits. Each cell is the full federal income tax added plus the NIIT on the $100,000 (our arithmetic; the NIIT is the lesser of $100,000 and the MAGI over the threshold).

Joint return

Single filer

Source: our arithmetic on Rev. Proc. 2025-32 sections 4.01, 4.03 and 4.14, IRC 1(h), 199A and 1411. The REIT column assumes $100,000 of qualified REIT dividends and a $20,000 deduction. The qualified column assumes the income stacks on top of the ordinary taxable income shown and that there is no other capital gain.

A worked case. A joint couple has $450,000 of wages and so $417,800 of taxable income after the $32,200 standard deduction, and the tax on wages alone is $86,608. A further $100,000 of BDC dividends adds $32,160.50 of income tax plus $3,800 of NIIT; $100,000 of REIT dividends with the 20% deduction adds $25,600 plus $3,800; $100,000 of qualified dividends adds $15,000 plus $3,800 (our arithmetic). The same cash payment produces a difference of $17,160.50 in income tax depending on its character.

What happens at the 37% line

A joint couple has $700,000 of taxable income, which leaves $68,700 of room in the 35% bracket before the 37% bracket starts at $768,700. If they add $150,000 of BDC dividends, $68,700 is taxed at 35% and $81,300 at 37%: $54,126 of income tax plus $5,700 of NIIT, $59,826 in all, 39.9% of the $150,000. Had the whole amount been taxed at 35%, the income tax would be $52,500; the 37% rate costs $1,626 on the part above the line (our arithmetic). A single filer at $600,000 of taxable income adding $100,000 has $40,600 at 35% and $59,400 at 37%.

The 2-point step is the smaller cost. The 3.8% NIIT, which starts at $250,000 and is not indexed, is added to every dollar above that, and the 20% rate on qualified dividends and long-term gain starts at $613,700 joint and $545,500 single, so at the 37% line a long-term gain is taxed 17 points below a BDC dividend (23.8% against 40.8% in our arithmetic). Other rules also key off the 37% threshold; the limit on itemized deductions for top-bracket taxpayers is covered in our charitable deduction page.

What a reader can do with this

• Find your own line first. Take taxable income from last year’s Form 1040, adjust for this year’s known changes, and locate it in the room table. The number to know is the dollars left before your rate changes, not your bracket name.
• Sort the year’s income by type. Your Form 1099-DIV and K-1 estimates tell you how much is ordinary (box 1a less box 1b and box 5), how much qualifies for the REIT deduction (box 5, K-1 code Z) and how much is gain (box 2a, K-1 box 9c). Each type is a different column in the stacking table.
• Treat a Roth conversion as ordinary income that is not itself net investment income. The Form 8960 instructions list income from certain qualified retirement plan distributions as excluded, but a conversion raises MAGI, and the NIIT is charged on the lesser of net investment income and the MAGI excess, so it can pull more of your fund income into the tax. Our year-end tax calendar lists the dates, and the estimated tax page covers the January 15 payment.
• Check the K-1 timing before relying on a year-end number. K-1 income is taxed whether or not cash arrives, and a K-1 can come after your own estimate; see our K-1 boxes guide.
• Ask a tax professional the specific question. The tables use the standard deduction and no other items; your return will differ, and the choice of what to take before December 31 is a decision for someone who has your whole return.

This is analysis of public documents, not investment, legal or tax advice.

FAQ

Sources, read and saved on October 22, 2026: Revenue Procedure 2025-32 (2026 inflation adjustments: sections 3.01, 3.12, 4.01, 4.03, 4.14 and 4.26); Internal Revenue Code sections 1, 199A, 854 and 1411 (Cornell LII); Instructions for Schedule K-1 (Form 1065), box 9c and code Z; Instructions for Form 8960 (2025); the IRS revenue procedure folder, checked for a 2027 inflation procedure. All tax dollar amounts at a given income, and every rate on the next dollar, are our arithmetic, using the script saved with this page.