Tax Season 2026: What Changed and How It Affects You

The tax changes, which took effect Jan. 1, include expanded deductions and credits that will put money back in taxpayers' pockets when they file returns due by April 15.

Rudy Blalock

Published: 1/29/2026, 3:26:59 AM EST

Tax Season 2026: What Changed and How It Affects You — A copy of an IRS 1040 tax form is seen at an H&R Block office in Miami, Fla., on Dec. 22, 2017. (Joe Raedle/Getty Images)

The 2026 federal income tax filing season kicks off this week with changes that could reshape how many Americans file their returns.

Tens of millions of Americans are expected to receive larger refunds than they did last year, thanks to retroactive provisions in President Donald Trump's One Big Beautiful Bill Act, passed in July 2025.

The tax changes, which took effect Jan. 1, include expanded deductions and credits that will put money back in taxpayers' pockets when they file returns due by April 15.

According to the Bipartisan Policy Center, the tax code changes are projected to deliver approximately $91 billion in retroactive tax relief for 2026, with roughly $60 billion distributed through refunds and $30 billion reducing what taxpayers owe outright.

New Deductions Expand Tax Relief

The standard deduction has increased for most filers. Single taxpayers will see the standard deduction rise to $15,750, while heads of households can claim $23,625, and married couples filing jointly can deduct $31,500.

But the changes extend beyond these basic deduction increases. Americans aged 65 and older can now claim a new $6,000 senior deduction, with the Tax Policy Center estimating that 24 million taxpayers will benefit, receiving an average tax cut of around $1,000.

Workers earning overtime pay can deduct up to $12,500 in overtime compensation annually. The Tax Policy Center projects 17 million taxpayers will claim this deduction with average tax cuts of approximately $1,400. Tipped workers, meanwhile, can deduct up to $25,000 in tips earned, though the Tax Policy Center estimates only 5 million taxpayers will claim this benefit, despite the Treasury Department projecting 10 million claims.

Vehicle purchases also receive new tax treatment. Taxpayers can deduct up to $10,000 in interest paid on auto loans for vehicles assembled in the United States.

The child tax credit increased to $2,200 per child under 17, up from $2,000, and will benefit an estimated 46 million tax units.

For high-income earners in states with steep taxes, the state and local tax deduction cap increased to $40,000 through 2029, up from the previous $10,000 limit that had been in place since 2018. The Bipartisan Policy Center reports that 15 million tax returns claimed SALT deductions in the 2023 filing season.

Refunds Expected to Surge

The nonpartisan Tax Foundation estimates the average refund will reach $3,800, a nearly 25 percent increase from the previous year's average of approximately $2,939.

However, early filing season data can be misleading. Refunds typically start smaller when the season opens in late January but spike dramatically in mid-February once the Internal Revenue Service (IRS) is legally permitted to issue earned income tax credit and refundable child tax credit refunds, according to the Bipartisan Policy Center.

Compliance Questions Remain

Several implementation questions persist as the season begins. The Bipartisan Policy Center notes that employers have not necessarily updated their reporting systems to provide workers the information needed to confidently claim new deductions for tips and overtime. The IRS has provided some guidance and transitional relief, but a lot of uncertainty remains about whether taxpayers will have the data they need to accurately report these new deductions.

IRS Faces New Challenges

Despite the wave of new benefits, the IRS faces challenges in administering the changes. The agency has experienced reductions in resources and personnel over the past year.

The IRS lost 25 percent of its workforce between January and May 2025, largely due to a federal government deferred resignation program that allowed employees to resign while receiving continued pay through September 2025.

Funding constraints compound staffing challenges. Congress originally appropriated $79 billion to the IRS under the Inflation Reduction Act in 2022, but subsequently rescinded $42 billion—more than half the original amount. The agency spent another $16 billion, leaving approximately $10 billion remaining, according to the policy center. A January 2026 bipartisan budget agreement would cut IRS funding by an additional 9 percent relative to 2025 levels.

Seven people served as IRS commissioner during 2025—a record for the agency's 164-year history. Since August 2025, Treasury Secretary Scott Bessent has served as acting IRS commissioner, with Social Security Commissioner Frank Bisignano holding a newly created position as IRS CEO.