The 2026 tax season is shaping up to be not just a simple annual ritual of boring calculations and forms, but a minefield of momentous changes. Yes, this year, there are new things that come into play and you better get to know everything before it’s too late or you do your taxes in the wrong way.
A combination of a sweeping new legislation, an executive order, and firm deadlines creates a scenario where preparation and accurate information are the (only) way to avoid penalties and reap unprecedented benefits. This is not a year for complacency or repeating past strategies. The system has changed, and the cost of failing to understand it is measured in dollars.
The IRS Is Changing Your Way to Get Money: Act Before April 15
The calendar sets the initial pace: starting January 26, 2026, the IRS will begin processing tax returns, kicking off a race whose regular deadline is April 15. Those needing more time can request an extension until October 15, but it’s a dangerous misconception to think this is extra time to pay.
Any taxes owed must be calculated and paid by April, or you will incur interest and penalties. The first golden rule, therefore, remains: estimating your tax liability in advance is the first line of defense against penalties.
However, the heart of the transformation beats in the One Big Beautiful Bill Act (OBBBA), legislation signed in July 2025, whose effects are fully applicable to the 2025 tax year (filed in 2026), has a two-pronged approach: it introduces a package of temporary deductions, with a 2028 horizon, and consolidates permanent increases to existing mechanisms.
Tips and Overtime Pay Just Changed in the Eyes of the IRS
For the average citizen, this translates into concrete opportunities. The law provides tax exemptions for tip income (up to $25,000) and overtime pay (up to $12,500 per individual), a direct benefit to the service sector and hourly workers.
For individuals over 65, it creates an additional $6,000 deduction, providing significant relief from the tax burden on Social Security benefits.
At the same time, the standard deduction takes a historic leap: $31,500 for married couples filing jointly, $23,625 for heads of household, and $15,750 for single individuals. This move alone redefines the equation for the 91% of taxpayers who choose not to itemize deductions.
Furthermore, the ceiling for the State and Local Income Tax (SALT) deduction quadruples, rising from $10,000 to $40,000 for high but not maximum incomes—a change that will resonate particularly in states with high tax burdens.
A New Tax Form Comes Into Play
But this landscape of apparent universal benefit has its pitfalls. Claiming the new temporary deductions (tips, overtime, auto loan interest) requires using a new form, Schedule 1-A. Failing to file it or filling it out incorrectly will mean missing out on money or, worse, an invitation to a future audit.
The complexity increases, because each deduction has its own eligibility limits and elimination phases based on adjusted gross income. Assuming you qualify without verifying the details is a costly mistake.
Getting Your Tax Refund Faster
The third basis of this transformation is logistical and marks the end of an era. By executive order, the IRS is phasing out paper refunds. In 2026, the requirement to receive a physical check will not only delay the receipt of funds by weeks but will also add risks of loss or theft.
Direct deposit is becoming, from a recommendation, an absolute necessity. For those without a bank account, well, they must hurry up and get one prepared before the payment date arrives.
Tax Deductions Installed by the OBBBA Act
The One Big Beautiful Bill Act (OBBBA), signed in July 2025, introduces several key deductions for the 2025 tax year, many of them temporary until 2028, designed to ease the tax burden for workers and seniors. Among the most notable is the tip deduction, which allows taxpayers to exclude up to $25,000 in reported tip income for occupations such as waiters or bartenders, with no income threshold.
Similarly, the overtime deduction covers up to $12,500 per individual ($25,000 for married couples) in additional overtime compensation, provided it is reported on forms such as W-2s or 1099s. For individuals 65 and older, there is an additional $6,000 deduction ($12,000 for couples), which is added to the standard deduction and helps with Social Security taxes, with an income threshold of $75,000 for single individuals.
In addition, up to $10,000 in interest can be deducted on loans for cars assembled in the U.S., with income limits starting at $100,000. These measures are claimed in the new Schedule 1-A and primarily benefit the middle class.
