IRS Unveils Sweeping Tax Changes For 2026 Filers

Tax season is here once again, but this year, millions of Americans will find the landscape has shifted beneath their feet. The Internal Revenue Service (IRS) officially opened the 2026 tax-filing season on Monday, January 26, 2026, marking the earliest start in recent memory. With the IRS expecting a record 164 million individual income tax returns—up from over 140 million last year—taxpayers are bracing for a season of new rules, bigger refunds, and a few surprises along the way, according to Axios, CNN, and USA Today.

At the heart of these changes is the One, Big, Beautiful Bill Act (OBBBA), signed into law in the summer of 2025. This sweeping legislation has introduced a raft of new tax breaks and deductions, reshaping how Americans file their taxes—and what they can expect to get back. For most, the federal tax filing deadline remains April 15, 2026, with the option to request an extension if needed. But what’s different this year, and how will it affect the average taxpayer?

First, let’s talk refunds. Last year, the average federal tax refund was $3,167, according to IRS data cited by CNN. This year, the Treasury Department projects refunds will increase by an average of $1,000 per household. Why the jump? As Tom O’Saben, director of tax content for the National Association of Tax Professionals, explained to CNN, “For clients whose income, filing status, and dependents haven’t changed much since 2024, the combination of expanded tax benefits for 2025 and unchanged withholding is clearly pushing refunds higher.” In other words, while tax liabilities have gone down thanks to new breaks, most people haven’t updated their paycheck withholdings—so the difference shows up as a larger refund.

A closer look at the OBBBA reveals several headline changes. For starters, the law introduces a new $6,000 federal deduction for Americans aged 65 and older who pay taxes on Social Security income, available through the 2028 tax year. Married couples where both spouses qualify can deduct up to $12,000. The AARP estimates that more than 30 million seniors will benefit from this new deduction, which can be claimed on top of the standard or itemized deductions. However, this deduction begins to phase out for individuals with a modified adjusted gross income over $75,000 (or $150,000 for joint filers), according to USA Today.

Workers who receive tips or overtime pay are also in for a treat. The OBBBA temporarily eliminates federal income taxes on tips, allowing eligible workers to deduct up to $25,000 a year. Likewise, overtime pay can be deducted—up to $12,500 for single filers and $25,000 for joint filers. But there’s a catch: these benefits phase out at higher incomes, specifically for those with a modified adjusted gross income above $150,000 ($300,000 for joint filers). Taxpayers claiming these new deductions will need to use the newly introduced Schedule 1-A form when filing their 2025 returns, as highlighted by Axios.

Another big change comes for those living in high-tax states. The cap on state and local tax (SALT) deductions has been temporarily raised from $10,000 to a whopping $40,000. This means that filers who itemize—and especially those in states with steep income or property taxes—can deduct much more from their federal returns. As O’Saben told CNN, “This change can be significant and often produces a noticeable refund increase, especially when withholding was not adjusted.” The expansion of the SALT deduction, combined with increases in other tax breaks, may prompt more filers to itemize rather than take the standard deduction.

Speaking of the standard deduction, it’s gone up, too. For tax year 2026, the IRS has set the standard deduction at $15,750 for single filers and $31,500 for married couples filing jointly—a boost of $750 and $1,500, respectively, from last year’s figures, according to CNN. Heads of household can claim $23,625, while USA Today notes that single taxpayers and married individuals filing separately can take $16,100, and heads of household $24,150, reflecting smaller but meaningful increases. O’Saben described this as “the most broadly impactful change because it affects millions of filers across income levels and filing statuses.”

Tax brackets have shifted as well. For 2026, the top rate of 37% applies to individual incomes over $640,600 ($768,700 for married couples filing jointly), with other brackets kicking in at lower thresholds. These changes, while subtle for some, may nudge filers into different tax categories, affecting overall liability.

For those eager to file, the IRS offers several options. IRS Free File opened on January 9, 2026, for taxpayers with adjusted gross incomes of $89,000 or less, using guided software from private-sector partners. Free File Fillable Forms are available to all, regardless of income, starting January 26. However, the Trump administration ended the free Direct File program, so taxpayers must choose from commercial software, professional preparers, or IRS-certified volunteer programs. The IRS says most refunds for e-filed returns are processed within 21 days, while paper returns may take six weeks or more. Refund status can be checked using the Where’s My Refund? tool or the IRS2Go mobile app, as reported by Axios.

One new wrinkle: last year, President Donald Trump ordered the Treasury to stop issuing paper checks for most payments, including tax refunds. As USA Today notes, the IRS now strongly encourages taxpayers to use direct deposit. For those without a bank account, some options remain, but direct deposit is the fastest and most secure way to receive your refund.

There are also new reporting requirements. If you received payments through apps like PayPal, Venmo, or CashApp for gig work or sales in 2025, you must report that income. The IRS will issue a 1099-K form for any amount from payment card companies, and from payment apps or marketplaces if payments exceed $20,000 and more than 200 transactions. Digital assets such as cryptocurrency, stablecoins, or NFTs must also be reported, whether you receive a form or not. The IRS has a dedicated page for digital assets to help taxpayers navigate these new rules.

Families with children should be aware of the new “Trump Accounts”—a retirement savings vehicle for children under 18, launched last year. To qualify, a child must have been born after January 1, 2025, and have a valid Social Security Number. Each account starts with a $1,000 deposit, with more details available at trumpaccounts.gov.

Finally, taxpayers are urged to review their paycheck withholdings. The IRS has adjusted its withholding tables for 2026 to reflect the new tax breaks, but its online withholding estimator hasn’t yet been updated to account for all changes. O’Saben recommends a “modest adjustment rather than a large reduction [in taxes withheld] helps avoid underpayment issues while still improving cash flow during the year.” Submitting a new W4 form to your employer can help fine-tune your withholding and avoid surprises next year.

With so many changes in play, this tax season promises both opportunity and complexity. For many, the result will be a welcome boost in their refund—or at least a smaller tax bill. But as always, careful planning and attention to detail will pay off when Uncle Sam comes calling.