The Internal Revenue Service (IRS) issued a reminder on November 26th, urging taxpayers to start preparing for the upcoming 2026 tax season. This comes in light of significant tax law changes brought about by the “One Big Beautiful Bill” passed in 2025, prompting taxpayers to familiarize themselves with the new regulations for maximizing tax refunds.
The “One Big Beautiful Bill” or OBBBA includes crucial provisions impacting various aspects of taxpayers’ income, from wages to investment earnings. Notably, changes concerning overtime pay and tips have caught the attention. Eligible employees can now apply for deductions on overtime pay, with unmarried taxpayers entitled to a maximum deduction of $12,500 and married couples filing jointly eligible for up to $25,000.
Moreover, employees receiving tips can enjoy tax exemptions on up to $25,000 of tip income, spanning across industries such as hospitality, digital content creators, and more.
For the elderly population, the new tax law brings benefits too. Qualified taxpayers aged 65 or above can now claim an additional $6,000 deduction, aiding in reducing taxable income, including taxable Social Security income.
Deductions reduce the amount of taxable income, potentially lowering the tax burden for individuals. The standard deduction under the “Tax Cuts and Jobs Act” has become a permanent provision, with increased limits in 2025. The standard deduction for single or married filing separately is $15,750, for heads of households it’s $23,625, and for married couples filing jointly or qualifying surviving spouses it’s $31,500.
The cap on State and Local Tax (SALT) deductions has been significantly raised from $10,000 to $40,000. This change may lead more taxpayers, especially those residing in high-tax states, to opt for itemizing deductions rather than claiming the standard deduction.
Child-rearing families stand to gain more tax benefits, with the Child Tax Credit increasing to $2,200 per child. Additionally, the Adoption Credit extends up to $17,670 in eligible expenses, with a potential refund of up to $5,000. The Other Dependent Credit for families with dependents over 17 or adult relatives is now a permanent provision.
Furthermore, taxpayers with children below 18 years old can now open Trump Savings Accounts as part of their tax filings.
Taxpayers purchasing new American-made vehicles can enjoy tax incentives too. Those buying qualifying vehicles after December 31, 2024, can deduct car loan interest, with a maximum deduction of $10,000.
Self-employed individuals and business owners can now deduct 100% of eligible equipment costs in 2025, provided the equipment was put into use after January 20, 2025. This bonus deduction covers various investments like machinery, equipment, and technological upgrades.
An important change in the 2025 tax law involves digital asset transactions. The IRS now requires digital asset brokers to issue 1099-DA forms for cryptocurrency and other digital exchanges. Even if taxpayers do not receive this form, they are still obligated to report the related income.
Adjustments have also been made to the reporting threshold for third-party payment platforms. Taxpayers selling goods online through platforms like Etsy or eBay or receiving payments through apps like Venmo or PayPal may receive 1099-K forms, with a new reporting threshold set at $20,000 and 200 transactions.
Registered financial planner and ClearVista Advisors founder Melissa Jean Stewart warns taxpayers about four common pitfalls to avoid when preparing taxes. Firstly, refrain from submitting tax returns too early as additional documents might require revision, potentially leading to extra taxes. Secondly, ensure all income sources are reported, including side gigs, investments, freelance work, or gambling winnings, to prevent audit triggers.
Thirdly, make sure to claim all eligible deductions and credits, such as the Earned Income Tax Credit, Child Care Credit, and Saver’s Credit. Lastly, thoroughly review tax returns before submission, ensuring all information is accurate, especially details like name, social security number, and bank information.
For freelancers and gig workers, Stewart recommends setting aside 25-30% of income in a separate account for tax payments and exploring options like individual 401(k) plans to reduce taxable income. Tracking income and expenses diligently using software like QuickBooks or free tools from banks is also advised.
The IRS advises taxpayers to gather and organize tax records early, including bank account details, W-2 forms from employers, 1099 forms from banks and other payers, and digital asset transaction records. Keeping documents in order helps ensure accurate tax filings, reducing errors that could lead to delayed refunds.
Taxpayers can access personal tax information through online IRS accounts to review records, arrange payments, obtain an Identity Protection PIN, and authorize tax professionals to access their tax records if needed.
It’s worth noting that the IRS is phasing out paper refund checks starting from September 30, 2025, with most taxpayers required to provide bank account information for direct deposit, the fastest way to receive refunds.
Furthermore, some tax incentives are coming to an end in 2025, including the Electric Vehicle Tax Credit concluding on September 30 and Home Energy Tax Credits and Enhanced Premium Tax Credits expiring on December 31.
H&R Block advises taxpayers to seek professional assistance amidst the myriad of tax law changes, ensuring they leverage all available tax benefits for maximum refunds.