Tax Law Changes for 2026
As you prepare to file your 2025 tax return in 2026, it's crucial to understand the key changes to tax laws, brackets, and deductions. 2026 brings major new tax breaks from the "One Big Beautiful Bill Act" (OBBBA) that could significantly increase your refund!
🎉 Major New Tax Breaks for 2026
The "One Big Beautiful Bill Act" (OBBBA), signed into law in July 2025, introduces several major tax breaks that are retroactively effective from January 1, 2025. This means you can claim them on your 2025 tax return!
💰 Average Refund Increase: $1,000+
Thanks to these new tax breaks and unchanged withholding tables, the average tax refund for 2026 is projected to be approximately $4,200 — about $1,000 more than last year!
🏠 SALT Deduction Cap Increased
The cap for state and local tax (SALT) deductions jumped from $10,000 to $40,000 for taxpayers with incomes up to $500,000.
This is huge for residents in high-tax states like California, New York, New Jersey, and Illinois!
👴 New Senior Deduction
Individuals aged 65 and older can claim an additional deduction of $6,000 ($12,000 for married couples where both qualify) for tax years 2025-2028.
👶 Increased Child Tax Credit
The Child Tax Credit increased to $2,200 per qualifying child for 2025, with annual inflation adjustments beginning in 2026.
💼 Tips & Overtime Deductions
New deductions for qualified overtime pay and tips received. The Tax Policy Center estimates an average tax cut of about $1,400 for each eligible taxpayer.
🚗 Auto Loan Interest Deduction
New deduction of up to $10,000 for interest paid on loans for certain Made-in-America vehicles.
💡 Pro Tip: Check your refund status with the IRS "Where's My Refund" tool! Due to these changes, many taxpayers are seeing larger-than-expected refunds. Learn how to track your refund →
Inflation-Adjusted Tax Brackets
The IRS adjusts tax brackets annually for inflation. Here are the 2025 tax brackets (for filing in 2026):
Single Filers
| Tax Rate | Income Range |
|---|---|
| 10% | $0 to $11,600 |
| 12% | $11,600 to $47,150 |
| 22% | $47,150 to $100,525 |
| 24% | $100,525 to $191,950 |
| 32% | $191,950 to $243,725 |
| 35% | $243,725 to $609,350 |
| 37% | $609,350+ |
Married Filing Jointly
| Tax Rate | Income Range |
|---|---|
| 10% | $0 to $23,200 |
| 12% | $23,200 to $94,300 |
| 22% | $94,300 to $201,050 |
| 24% | $201,050 to $383,900 |
| 32% | $383,900 to $487,450 |
| 35% | $487,450 to $731,200 |
| 37% | $731,200+ |
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Updated Standard Deductions
Standard deductions have increased for 2025:
- Single: $15,750 (up from $14,600 in 2024)
- Married Filing Jointly: $31,500 (up from $29,200 in 2024)
- Head of Household: $23,650 (up from $21,900 in 2024)
Child Tax Credit Increased
NEW for 2025: The Child Tax Credit has increased to $2,200 per qualifying child under age 17, with up to $1,700 refundable.
This $200 increase (from $2,000 in previous years) provides additional relief for families and can substantially increase your refund. The credit will continue to adjust annually for inflation beginning in 2026.
Retirement Contribution Limits
Contribution limits for retirement accounts have increased:
- 401(k), 403(b), 457 plans: $23,000 ($30,500 if age 50+)
- IRA (Traditional & Roth): $7,000 ($8,000 if age 50+)
- HSA (Single): $4,300
- HSA (Family): $8,550
SALT Deduction Cap INCREASED
MAJOR CHANGE: The State and Local Tax (SALT) deduction cap has increased dramatically from $10,000 to $40,000 for 2025!
This new cap applies to taxpayers with incomes up to $500,000 and will continue to rise annually through 2029. This is especially beneficial for residents of high-tax states like:
- California
- New York
- New Jersey
- Illinois
- Connecticut
Earned Income Tax Credit (EITC)
The EITC has been adjusted for inflation. Maximum credits for 2025:
- No children: Up to $600
- One child: Up to $3,995
- Two children: Up to $6,604
- Three+ children: Up to $7,430
Electric Vehicle Credit Updates
The clean vehicle credit continues with some modifications:
- New EVs may qualify for up to $7,500
- Used EVs may qualify for up to $4,000
- Stricter domestic assembly and battery component requirements apply
- Income limits: $300,000 (married), $225,000 (head of household), $150,000 (single)
Key Dates for 2026 Filing Season
- January 27, 2026: IRS begins accepting 2025 tax returns
- April 15, 2026: Tax filing deadline (extended to April 17 if weekend)
- October 15, 2026: Extended filing deadline (if extension filed)
What This Means for You
With inflation adjustments across the board, many taxpayers will see slightly lower tax bills or higher refunds compared to previous years, even with the same income levels.
The increased standard deduction is particularly beneficial, meaning fewer taxpayers will need to itemize, simplifying the filing process.
Use our free tax calculator with all the latest 2025 tax brackets and deductions.
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