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IRS tax refunds will get bigger for millions for Americans in 2026. This is due to new tax breaks legislators introduced in a landmark tax and spending bill last summer. Taxpayers will inevitably have questions -- and the IRS has far fewer staffers to answer them this year. The agency is more than 25 per cent leaner than it was last tax season, which could strain customer service.
Taxpayers need to keep in mind the changes before the tax filing deadline of April 15.
Should I consider any strategic changes to filing this year?
Possibly. The standard deduction has risen slightly for tax year 2025 to $15,750 for singles, $31,500 for married joint filers and $23,625 for heads of household.
Taking the standard deduction will make sense for many taxpayers, since they won't have enough individual deductions to make it worth itemizing them.
That said, more filers may want to contemplate itemizing because of other changes, namely, a more generous deduction on state and local taxes (known as SALT).
How did the tax treatment of SALT (state and local taxes) change?
During Trump's first term, Congress passed the Tax Cuts and Jobs Act, which created a $10,000 cap on the deduction that people could take on their federal tax return for state and local taxes (on earned income and property taxes, for example) if they itemized their deductions. The cap offset the costs of many other tax cuts in the 2017 law -- but many residents in high-tax states like New York, California and New Jersey took a big hit.
For tax year 2025, the cap is rising to $40,000. The full deduction then decreases incrementally for single people and married joint filers with modified adjusted gross income of more than $500,000, and the $10,000 ceiling returns for those with income of $600,000 or more.
While a heftier standard deduction makes it less likely that many filers will want or need to itemize their deductions, the larger SALT deduction may make using it worthwhile again for people in states with higher income and property taxes (at least through tax year 2029, after which it reverts back to $10,000).
Have the rules around deducting mortgage costs finally stopped changing?
The maximum mortgage interest you can deduct is not rising from its current $750,000 level for more recent mortgages. Without the 2025 tax bill, the cap would have gone up.
What's changing with the tax breaks for charitable deductions?
Two main things are happening here, and they take effect in the 2026 tax year.
First, if you take the standard deduction you'll still be able to deduct some charitable contributions.
Single people will be able to deduct up to $1,000 in cash contributions and couples who are married and filing jointly will get $2,000. You can't use this particular deduction, however, if you donate to a donor-advised fund and certain other entities.
Second, for the more affluent filers who itemize their deductions: Starting in the 2026 tax year, people in the 37% tax bracket won't get the full benefit of the deduction for their charitable contributions. Instead, they'll get a deduction as if they were in the 35% bracket.
And some more bad news that applies to everyone who itemizes: The only contributions that will be deductible are ones that are above 0.5% of your adjusted gross income.
Seniors are getting an extra tax break. How does it work?
People who are 65 and older (by December 31 of the tax year you're filing for) are eligible for a tax deduction of up to $6,000 for individuals and $12,000 for married couples, as long as both spouses qualify.
The deduction begins to gradually fade once your modified adjusted gross income passes certain thresholds -- $75,000 for single filers or $150,000 for married joint filers. Above those amounts, the deduction begins to decrease, and it goes away once single taxpayers' income reaches $175,000 ($250,000 for couples).
The tax break -- in place for tax years 2025 through 2028 -- is available to filers who take the standard deduction, as well as those who itemize deductions.
Taxpayers need to keep in mind the changes before the tax filing deadline of April 15.
Should I consider any strategic changes to filing this year?
Possibly. The standard deduction has risen slightly for tax year 2025 to $15,750 for singles, $31,500 for married joint filers and $23,625 for heads of household.
Taking the standard deduction will make sense for many taxpayers, since they won't have enough individual deductions to make it worth itemizing them.
That said, more filers may want to contemplate itemizing because of other changes, namely, a more generous deduction on state and local taxes (known as SALT).
How did the tax treatment of SALT (state and local taxes) change?
During Trump's first term, Congress passed the Tax Cuts and Jobs Act, which created a $10,000 cap on the deduction that people could take on their federal tax return for state and local taxes (on earned income and property taxes, for example) if they itemized their deductions. The cap offset the costs of many other tax cuts in the 2017 law -- but many residents in high-tax states like New York, California and New Jersey took a big hit.
For tax year 2025, the cap is rising to $40,000. The full deduction then decreases incrementally for single people and married joint filers with modified adjusted gross income of more than $500,000, and the $10,000 ceiling returns for those with income of $600,000 or more.
While a heftier standard deduction makes it less likely that many filers will want or need to itemize their deductions, the larger SALT deduction may make using it worthwhile again for people in states with higher income and property taxes (at least through tax year 2029, after which it reverts back to $10,000).
Have the rules around deducting mortgage costs finally stopped changing?
The maximum mortgage interest you can deduct is not rising from its current $750,000 level for more recent mortgages. Without the 2025 tax bill, the cap would have gone up.
What's changing with the tax breaks for charitable deductions?
Two main things are happening here, and they take effect in the 2026 tax year.
First, if you take the standard deduction you'll still be able to deduct some charitable contributions.
Single people will be able to deduct up to $1,000 in cash contributions and couples who are married and filing jointly will get $2,000. You can't use this particular deduction, however, if you donate to a donor-advised fund and certain other entities.
Second, for the more affluent filers who itemize their deductions: Starting in the 2026 tax year, people in the 37% tax bracket won't get the full benefit of the deduction for their charitable contributions. Instead, they'll get a deduction as if they were in the 35% bracket.
And some more bad news that applies to everyone who itemizes: The only contributions that will be deductible are ones that are above 0.5% of your adjusted gross income.
Seniors are getting an extra tax break. How does it work?
People who are 65 and older (by December 31 of the tax year you're filing for) are eligible for a tax deduction of up to $6,000 for individuals and $12,000 for married couples, as long as both spouses qualify.
The deduction begins to gradually fade once your modified adjusted gross income passes certain thresholds -- $75,000 for single filers or $150,000 for married joint filers. Above those amounts, the deduction begins to decrease, and it goes away once single taxpayers' income reaches $175,000 ($250,000 for couples).
The tax break -- in place for tax years 2025 through 2028 -- is available to filers who take the standard deduction, as well as those who itemize deductions.
