Major 2026 tax law changes: Higher standard deductions, new credits, and larger refunds
Jan 30, 2026, 12:04 PM
Current federal tax forms are distributed at the offices of the Internal Revenue Service. (Photo Illustration: Scott Olson, Getty Images)
(Photo Illustration: Scott Olson, Getty Images)
The 2026 tax filing season is underway, and major changes approved by Congress last year could mean larger refunds for many Americans, according to consumer expert Herb Weisbaum, contributing editor at Checkbook.org.
Weisbaum said the adjustments stem from “the one big, beautiful bill” passed in July, which extended expiring tax breaks, created significant new ones, expanded several tax credits, and boosted deductions.
Some provisions took effect January 1, but others apply retroactively to the return due April 15. The Tax Foundation estimates the changes will result in an average tax cut of about $610 and increase the average refund to roughly $3,800. Weisbaum cautioned that the bump is likely temporary because withholding tables did not change until January.
“But this year — yeah, enjoy,” he said.
One of the biggest changes affects the standard deduction, which nearly 90% of taxpayers claim. Congress added an additional 5% increase beyond inflation.
“That means the standard deduction for married couples filing jointly is now $31,500,” Weisbaum said.
Single filers will be able to claim $15,750, while heads of household can claim $23,625. Taxpayers 65 and older or who are blind can claim an additional deduction of up to $6,000.
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New deductions for 2025
Weisbaum also highlighted three new deductions for 2025.
The first is for overtime pay: a new deduction worth up to $12,500 for individuals or $25,000 for joint filers. It applies only to the “one-half portion of the time and a half” premium rate.
“This is going to be huge for a lot of people who make overtime pay,” Weisbaum said.
The second is for tipped workers. Those in one of 68 IRS-designated occupations that “customarily and regularly” receive tips can deduct up to $25,000 in qualified cash tips. Weisbaum said the change honors “a promise from the Trump administration, no tax on tips.”
The third is for new car loans. Taxpayers who purchased a new vehicle in 2025 and took out a qualifying auto loan can deduct up to $10,000 in interest, even without itemizing. The car must be assembled in the United States and purchased for personal use.
Itemizers may also benefit from a substantial increase in the state and local tax (SALT) deduction cap.
“Single filers and married couples who itemize can deduct up to $40,000,” Weisbaum said, noting the previous limit had been $10,000.
To receive refunds quickly, Weisbaum urged taxpayers to file electronically.
“If you do it electronically and don’t have any errors on your return, they should have the refund to you within 21 days,” he said.
Paper checks will no longer be issued, and refunds must be directly deposited.
Weisbaum also reminded taxpayers that a large refund is not necessarily a financial win.
“If that’s how much money you’re getting back, that’s a loan for free that you gave to Uncle Sam,” he said.
Adjusting withholding could give workers access to more of their income throughout the year.
Weisbaum’s full guidance and links to IRS resources are available at Checkbook.org.
Manda Factor is the host of “Seattle’s Morning News” on KIRO Newsradio. Follow Manda on X and email her here.
