2026 Tax Changes: Expect Bigger Refunds, New IRS Deductions
The US has just started its first tax season since President Donald Trump signed the One Big Beautiful Bill Act, or OBBBA, last July. Aside from politics, the law may affect how much you owe the IRS, how big your refund is, and more.
The OBBBA expanded and changed many provisions in the Tax Cuts and Jobs Act of 2017, which was passed by Congress during Trump’s first term. Worse, many of the consumer-facing changes to the OBBBA went into effect in early 2025, meaning they will affect tax returns that people file this spring.
According to Hannah Cole, founder of the tax education website Sunlight Tax, that’s by design.
“Part of the high-sugar bill — the part that’s probably right — is intended to go in now, before the mid-term elections,” he said.
Here are eight big changes you can expect this tax season:
1. Generalized larger deductions
The Tax Cuts and Jobs Act nearly doubled the standard deduction, resulting in about 90% of filers taking it. OBBBA made this increased standard deduction permanent; in 2025, it is $15,750 for single filers, $31,500 for married couples and $23,625 for heads of households.
This is important because the higher the standard deduction, the greater the income that is sheltered from taxes.
2. “No tax” on tips and overtime
Eligible workers — a broad category that includes salespeople, waiters, bellhops, electricians, plumbers, teachers, nannies, hairdressers, tattoo artists, tour guides and more — can deduct up to $25,000 of their qualifying tips from their income.
“That can make a big difference,” said Andy Phillips, head of H&R Block’s Tax Institute.
Cole points out that to qualify, your tips must be properly reported to employers, who by 2025 “will be allowed to use any reasonable method” to measure them. The IRS estimates that about 6 million workers report tipped wages.
There is also a new deduction for overtime work that allows certain employees to “deduct pay in excess of their regular rate of pay” up to $12,500 ($25,000 for joint filers), according to the IRS. Both tip and overtime deductions kick in once your earnings reach $150,000 for single filers ($300,000 for joint filers). They are available regardless of whether you file your taxes and last until 2028.
3. New ‘higher bonus’ and car loan interest
The much talked about “no tax on Social Security” proposal is different from what became law.
“The way [Congress] they passed this bill through the reconciliation process, they couldn’t change the way Social Security works, including the way it’s taxed,” Phillips said. “Instead, they created a new deduction.”
The so-called “super bonus,” actually for tax years 2025 through 2028, is a deduction worth up to $6,000 for a taxpayer age 65 and older. It ends for those with income over $75,000 ($150,000 for joint filers), and you don’t have to already be receiving Social Security benefits to claim it.
Taxpayers can also deduct interest paid on other car loans. The maximum annual deduction here is $10,000, and it ends when your income reaches $100,000 ($200,000 for joint filers). To qualify, your loan must have originated after December 31, 2024, and be for a personal vehicle. That car must be under 14,000 pounds and last assembled in the US
To find that last part, drivers can use the National Highway Traffic Safety Administration’s VIN Decoder.
4. Big tax refunds
Treasury Secretary Scott Bessent said “millions of Americans could see the biggest tax refund of their lifetimes in 2026.” And it’s true: Many taxpayers didn’t adjust their withholding after OBBBA was passed. The IRS still hasn’t even updated the withholding rate on its website.
That means millions of people were caught last year – and they’ll get that money in their refunds. In 2025, the average tax refund was $3,167. Estimates point to an increase in this year’s standard refund of $300 to $1,000.
“The returns are going to be big for a lot of people,” but the jump won’t be the same across the board, Phillips said. “It’s going to be very personal to each individual. What people need to do is to get a good understanding of what these changes in the rules mean for them.”
5. New IRS forms
If you’re finding it difficult to keep track of all these changes, you’re in luck: The IRS has released a new form called Schedule 1-A that basically combines the four deductions listed above and calculates what your savings are.
There’s no reason to worry about the document, though. Cole says if you use a tax preparer, they will know how to capture the relevant data and file it for you.
Another new IRS document is Form 4547, which allows parents with eligible children to choose to open a Trump account, which is a tax-advantaged savings tool for Americans born between Jan. 1, 2025, and Dec. 31, 2028. As part of the pilot program, the US Treasury will kick in the rate at around $1.00 and some will increase by $1.00. contribute up to $5,000 per year.
Trump’s accounts don’t officially launch until this summer; at that time, the White House is expected to release an online portal. But as Vanguard points out, eligible taxpayers who file Form 4547 will now be ready to go as soon as the accounts are opened.
6. Changes to the child tax credit
Phillips explains that the OBBBA changed the child tax credit, raising the maximum amount to $2,200 for each qualifying child under 17 by 2025. Starting this year, it will be adjusted annually to account for inflation.
Previously, the maximum amount was $2,000 in 2025, and the credit was reduced to $1,000 per child in 2026. Parents qualify for the full amount as long as their annual income does not exceed $200,000 ($400,000 for married couples filing jointly); above those limits, the credit categories expire.
The child tax credit is partially refundable, meaning you can get part of it back even if you don’t owe any taxes. By 2025, the refundable portion is worth up to $1,700.
7. No more paper checks
Don’t expect to receive your tax refund with a paper check this year — or you will again.
In 2025, Trump issued an executive order mandating that the federal government send all payments electronically starting September 30, saying the paper “imposes unnecessary costs; delays; and risks of fraud, lost payments, theft, and inefficiencies.”
The IRS has long encouraged taxpayers to set up direct deposit to get their refunds faster, but now that recommendation is the rule (with very few exceptions). If you don’t have a bank account, you can open one for little or no cost by visiting the FDIC’s Get Banked! site or MyCreditUnion.gov. If you can’t set one up, the IRS says it will offer options like prepaid debit cards and digital wallets.
Paper returns take weeks to process, so you should also submit your return digitally if possible.
8. Lower 1099-K reporting threshold
The 1099-K situation has proven to be a bit of a conundrum over the past few years. The limit for receiving a 1099-K form from a payment app or online marketplace used to be $20,000 and 200 transactions. The 2021 American Rescue Plan lowered the bar to $600 with any number of transactions, shocking everyone from Etsy sellers to StubHub power users.
Casual payments between friends and family would not be subject to these rules, but the message was confusing. As a result, the rollout of the new policy was delayed several times, with the IRS slowly raising the threshold until — you guessed it — the OBBBA changed it again.
Jared Ballew, vice president of government relations at TaxAct, says the new tax law restores previous restrictions. If your payments for goods or services exceed $20,000 for more than 200 transactions, the processor is required to send you a 1099-K. Less than that, it may not happen.
But you are not on the phone.
“If you work on the side, even cash or Venmo payments are taxed,” Bellew said. “Not getting a 1099 doesn’t mean you don’t owe tax on that income.”
More from Mali:
Why Filing Your Taxes Early Is Especially Smart This Year
Here’s How To Track Your Tax Refund
IRS Officially Kills Direct File, ‘Failed’ Program That Provided Millions in Free Tax Preparation
