The IRS has announced important tax changes that will affect millions of people in the U.S., and understanding them is key to know how they can influence your next tax return and your personal finances. Most of these changes come from the One Big Beautiful Bill, signed by the U.S. President Donald Trump. So, let’s find out more about what is going to change this year 2026.
Higher standard deduction
One of the most important changes is the increase in the standard deduction. The standard deduction is the part of your income that is not taxed, which means you pay taxes on a smaller amount of money. Most people choose this option because it is easy and does not require extra paperwork. Because of this change:
- Couples who file their taxes together could deduct $31,500.
- People who file their taxes individually could deduct $15,750.
Before, these amounts were lower. This is important because, according to IRS data, more than 90% of taxpayers use the standard deduction. Basically, this change means that many people will pay less taxes, since most income won’t be taxable.
Extra deductions
Between 2025 and 2028, qualifying 65-year-old seniors (or older) will be allowed to subtract an extra $6,000 from their taxable income, which means they may owe less in taxes.
Unfortubately, not everything is positive, there is a limitation.This extra deduction starts to disappear if a person’s adjusted gross income is higher than $75,000.Also, some states and cities, including Washington, DC, have chosen not to follow this rule.
Tips and overtime
Another important change announced by the IRS is the tax deduction over certain work income. Among the changes we can find:
- Removal of taxes on car loan interest.
- Reduction on taxes applied to part of the overtime payment.
- Not paying federal taxes over tips, up to a maximum of $25,000.
These changes do not mean that these types of income are completely tax-free in every situation. There are still certain rules that must be followed, and some states or cities may choose not to apply these deductions. Because of this, not all workers will qualify, and eligibility can depend on where a person lives.
What the data say about tax refunds
What would you say Americans use their tax refund for? To know this, a survey showed that most taxpayers use it for basic needs, scuch as rent, groceries, and paying off debt. The average refund was a bit more than $2,300 and people didn’t expect that much. So, you can imagine how helpful this was for many families.
New IRS credit
Another important announcement is the creation of a new tax credit worth up to $1,700, although it won’t be available immediately. If you are interested in this credit, you have to wait until 2027.
The credit will be for people who donate money to approved scholarship organizations that help low- and middle-income families pay for education. The credit is nonrefundable, meaning it can lower your tax bill but won’t result in extra cash back.
Preparing for tax season
The IRS recommends Americans to prepare ahead to avoid any mistakes and stress. Some of the recommendations are:
- Check their online IRS accounts early.
- Gather all documents like W-2s and 1099s.
- Keep records of bank information and digital assets.
Now you know how important it is to understand the IRS system for your financial decisions. Even small changes can affect how much money you owe or receive: whether it is higher deductions, new credits, or changes to income taxes. We hope this article was helpful for you!