The 2026 filing season is underway, and several changes to the tax code will affect most taxpayers’ returns, especially compared to last year, when the IRS made only routine inflation adjustments.

The so-called “One Big Beautiful Bill,” enacted in July 2025, extended some expiring tax breaks, created significant new ones, expanded several tax credits, and boosted deductions. Many of these provisions didn’t kick in until January 1, 2026, but some are retroactive and will apply to the return due on April 15, 2025.

“We estimate the major tax changes for 2025 will lead to an average tax cut of about $610,” said Garrett Watson, director of policy analysis at the nonpartisan Tax Foundation. “By our estimates, that will bring the average refund up from roughly $3,050 in tax year 2024 to closer to $3,800 in 2025.”

But this may be “a one-time bump,” Watson cautioned. Some people will get refunds, or larger-than-usual refunds, this year because their employers did not adjust withholding to reflect the tax law changes that applied to 2025. Starting in January, employers should have adjusted withholding amounts accordingly.

Here is a rundown of key changes for tax year:

Increases to Standard Deduction

The standard deduction, which most people claim, rather than itemizing deductions, increases every year, based on inflation. For 2025, Congress added five percent to the inflation factor.

That means the standard deduction for married couples filing jointly rose by $1,500 to $31,500. And it’s $750 more for single taxpayers and married individuals filing separately ($15,750), and for heads of households ($23,625).

New Deduction for Seniors and Blind Taxpayers

Taxpayers who are 65 or older or blind can claim a new deduction in addition to their standard deduction: $6,000 for eligible individuals and $12,000 for a married couple, if both spouses qualify. This extra deduction phases out if an individual has a maximum adjusted gross income (AGI) of more than $75,000 and for joint filers with an AGI of more than $150,000.

New Deduction for Income from Tips

The “No Tax on Tips” deduction can benefit employees and self-employed individuals if they received “qualified tips.” To claim it, you must have worked in an occupation listed by the IRS as “customarily and regularly involving tips.” Click here for a list of 68 jobs that the IRS says qualify; they include bartenders, waiters, delivery people, massage therapists, gambling dealers, golf caddies, pedicab drivers, and tattoo artists.

The maximum deduction for cash tips received by employees in 2025 is $25,000. For self-employed individuals, the deduction may not exceed their net income from the trade or business from which the tips were earned.

This deduction, which is available through 2028, phases out for individual taxpayers with modified AGI of more than $150,000 and for joint filers with an AGI of more than $300,000.

“If you’re an employee who’s earning tips, such as a bartender or restaurant worker, the tip income is already often reported separately from other types of compensation by your employer,” Watson noted.

New Deduction for Overtime Pay

This deduction is worth up to $12,500 for individuals and $25,000 for joint filers. For tax years 2025 through 2028, you can deduct overtime pay that exceeds your regular compensation, whether you itemize or not.

“This deduction applies only to the one-half portion of time-and-a-half; the premium you get for working overtime,” Watson explained. “Let’s say your hourly rate is $20, and your time-and-a-half rate is $30. That $10-per-hour difference is the amount that’s deductible.”

If your W-2 doesn’t show the detailed breakdown needed to claim the overtime deduction, talk to your employer. The IRS requires companies to provide this info, Watson noted.

As with the other new deductions, this one has income limits. The overtime deduction begins to phase out for individual taxpayers with a modified AGI of more than $150,000 and for joint filers with an AGI of more than $300,000.

New Deduction for Interest Paid on Some Car Loans

Interest of up to $10,000 paid on a new-car loan that originated in 2025 can now be deducted—even for those who don’t itemize—provided the vehicle was purchased for personal use and meets other eligibility requirements. (Interest paid on leased vehicles and used car purchases do not qualify for this deduction.) 

A qualified vehicle, according to the IRS, is a car, minivan, van, SUV, pickup truck, or motorcycle with a gross vehicle weight rating of less than 14,000 pounds that has undergone final assembly in the United States.

Unfortunately, the IRS doesn’t have a lookup tool that will tell you whether your vehicle loan qualifies for this deduction. But your vehicle identification number (VIN) includes your car’s manufacturing plant; use this VIN Decoder, available from the National Highway Traffic Safety Administration, to determine whether your ride was assembled in the U.S.

This deduction phases out for individual taxpayers with a modified AGI of more than $100,000 and joint filers with an AGI of more than $200,000. It’s available through 2028.

Higher Deduction for State and Local Taxes

Taxpayers who itemize can deduct some of the state and local taxes (SALT) paid during the year. Since 2018, this deduction has been limited to $10,000. The new law boosted the amount to $40,000 for single filers and married couples, and to $20,000 for married couples filing separately.

The $40,000 maximum deduction gets reduced for those with a modified AGI of more than $500,000.

“This is mostly for upper-middle-class and upper-class folks who have higher incomes and pay a larger nominal amount of state and local taxes,” Watson said.

The SALT cap reverts to $10,000 in 2030.

Changes to Tax Credits

A tax credit is a dollar-for-dollar amount that eligible taxpayers can claim on their returns to reduce their tax bills. Here are a few key changes for this filing season:

• Child Tax Credit: Families with qualifying children (dependents younger than 17 at the end of the 2025 tax year) may be able to claim this credit even if they don’t normally file a tax return. The maximum credit was increased to $2,200 per qualifying dependent child.
• Earned Income Tax Credit: This credit is for low-to-moderate-income working individuals and families, particularly those with children. The credit ranges from $629 for those with no qualifying children to $8,046 for those with three or more qualifying children. The maximum AGI for the 2025 tax season is $61,555 for single filers and heads of households, and $68,675 for married couples filing jointly.
• Adoption Credit: Those who adopted or started an adoption process in 2025 may qualify for an adoption tax credit of up to $17,280 per qualifying child.

Other Significant Changes for 2025 Tax Returns

The government made several other adjustments to account for inflation, including:

Alternative Minimum Tax: The new AMT exemption amounts are $88,100 for individuals and $137,000 for married couples filing jointly. These exemptions begin to phase out at $626,350 for single filers and $1,252,700 for married couples filing jointly.

Foreign Earned Income Exclusion: Increased to $130,000.

Estate Taxes: The basic exclusion from federal estate taxes is now $13,990,000 for those who died in 2025.

Disclosure of Gifts: The annual exclusion increased to $19,000.

Expecting a Refund?

The quickest and best way to get your refund is to file your return electronically. In most cases, the IRS says, if there are no errors and the return is complete, you should get your money in less than 21 calendar days.

Following an executive order issued by President Trump in 2025, in most cases the IRS will no longer send paper refund checks. So you’ll need to tell the IRS how to pay you via direct deposit to a checking or savings account or a mobile payment app, or to send you a prepaid debit card. You can also instruct the IRS to divvy up your refund payment and send it to two or three different accounts.

The IRS cannot issue refunds before mid-February to taxpayers who claim the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC). By law, the IRS must hold the entire refund—not just the portion associated with these credits—until it has completed its review of that return.

Use the Where’s My Refund? tool on the IRS website to check on the status of your refund within 24 hours of e-filing. If you file a paper return, this information is usually available within four weeks.

If after completing your return you find that you owe taxes, you don’t have to pay until April 15, which may give you time to save up. If you still can’t afford to pay what you owe by then, see if you qualify for an IRS payment plan.

Need Help?

Most taxpayers can get free help preparing and filing their returns; click here for our rundown of what’s available. We also provide a way to prevent someone from filing a fraudulent return in your name.

You’ll find a variety of online tools at IRS.gov, including how to get ready to prepare your return; forms, instructions, and publications; and tips on choosing a tax preparer.

The Interactive Tax Assistant tool provides specific answers to many common tax questions, such as whether you should file a return. It can also determine your filing status, whether someone can be claimed as a dependent, which sources of income are taxable, expenses you can deduct, and qualifications to claim tax credits.

Create an IRS Online Account, and you can securely access personal tax account information, including balance, payments, and tax records, including adjusted gross income.

Changes Ahead for Next Year

The IRS has already announced inflation adjustments for tax year 2026 (the return that’s due in April 2027). The standard deduction will increase again: $32,200 for married couples filing jointly, $16,100 for single taxpayers and married individuals filing separately, and $24,150 for heads of households.

Also, the limits for contributions to Health Flexible Spending Accounts (FSAs) will increase to $3,400. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount will be $680.

More Info:

Checkbook: Taxes: Free Preparation and Filing Options 

Checkbook: Protect Yourself from Tax Return Identity Theft

IRS: Information About the New Deductions Created by the New Tax Law

IRS: Tax Inflation Adjustments for Tax Year 2026

Tax Foundation: Tax Brackets & Credits 2025