The 2026 tax season is shaping up to bring unexpected good news for many Americans. The recently approved One Big Beautiful Bill Act introduces several new tax deductions and credits that will start applying in tax returns filed in 2026.
These provisions could mean larger refunds for millions of taxpayers—especially workers who earn tips, overtime pay, and those with children or senior benefits.
IRS Confirms No Changes for 2025
The IRS confirmed in August 2025 that tax forms and withholding tables will remain unchanged for the 2025 tax year. Employers will keep using the same W-2s, 1099s, and 941s until the IRS issues updated versions for 2026.
This means that withholding amounts on paychecks will not yet reflect the new deductions. While that ensures stability for now, it also sets up the possibility of bigger refunds in 2026 because withholdings won’t adjust until later.
Key Changes Starting in 2026
From 2026 onward, new deductions and credits will kick in, impacting how much you owe—or get back—at tax time:
- Tip Income Deduction – Workers in tipped industries can deduct up to $25,000 from taxable income.
- Overtime Deduction – Deduction up to $12,500 for single filers or $25,000 for joint returns, reducing taxes on time-and-a-half pay.
- Senior Deduction – Extra deduction of $6,000 per individual (or $12,000 per couple) for taxpayers aged 65 and older.
- State and Local Tax (SALT) Deduction – Cap raised to $40,000, providing relief for households in high-tax states.
- Child Tax Credit (CTC) – Increased to $2,200 per child, with annual adjustments for inflation beginning in 2026.
- Auto Loan Interest Deduction – Up to $10,000 for loans on new vehicles assembled in the U.S.
- New Tax Accounts – A one-time contribution of $1,000 for each child born between 2025 and 2028, added into special savings accounts.
2026 Tax Law Changes
| Provision | Details |
|---|---|
| Tip Income Deduction | Up to $25,000; applies to qualified tip earners |
| Overtime Deduction | $12,500 (single) / $25,000 (joint) |
| Senior Deduction (65+) | $6,000 per individual / $12,000 per couple |
| SALT Deduction Cap | Raised to $40,000 |
| Child Tax Credit | $2,200 per child; indexed for inflation |
| Auto Loan Interest | Up to $10,000 for loans on new U.S.-assembled vehicles |
| Child Savings Accounts | $1,000 seed contribution for births 2025–2028 |
Why Refunds Could Be Larger
Since withholding tables won’t change in 2025, taxpayers will continue paying the same amounts throughout the year. But when filing in 2026, these new deductions and credits will be applied in full, lowering taxable income and increasing refunds.
For example:
- A restaurant worker earning tips could claim a $25,000 deduction, reducing their taxable income substantially.
- A family with overtime workers and children could combine deductions with the expanded Child Tax Credit, leading to thousands in extra refund potential.
- Seniors over 65 could also benefit from additional deductions, making their refund even higher.
Analysts suggest that many taxpayers could see average savings of several thousand dollars once the law fully applies.
Preparing for the 2026 Tax Season
To maximize your refund under the new law, here are a few steps:
- Keep accurate records of tips and overtime earnings throughout 2025.
- Confirm eligibility for deductions such as senior benefits or child tax credits.
- Plan ahead for SALT deductions, especially if you live in states with higher property or income taxes.
- Check for auto loan deductions if buying a qualifying U.S.-made car.
- Stay updated with IRS announcements, as new forms and instructions will be published before October 2025.
The 2026 IRS tax refund could indeed surprise many Americans. The One Big Beautiful Bill Act brings sweeping changes, including deductions for tips, overtime, seniors, higher SALT caps, and expanded child credits. Since withholdings remain unchanged in 2025, many taxpayers will likely get larger refunds when filing in 2026.
Now is the time to prepare, document earnings carefully, and stay informed—so when tax season arrives, you can maximize your payout and take full advantage of the new law.
FAQs
Will everyone get a bigger refund in 2026?
Not necessarily. Refund amounts depend on income, filing status, and whether you qualify for the new deductions. Those earning tips, overtime, or with children and senior benefits are more likely to see larger refunds.
Why aren’t refunds increasing in 2025?
Because withholding tables and forms remain unchanged until 2026, the benefits won’t show up until you file taxes for the 2025 tax year in 2026.
How can I make sure I don’t miss out?
Maintain complete income records, file your tax return on time, and ensure you use the updated IRS forms that will be released in late 2025.