As the 2026 tax season approaches, many individuals could see their tax refunds significantly impacted by new tax changes affecting 2025 federal income tax returns. Tax experts anticipate that the upcoming season will bring both considerable opportunities for larger refunds and potential confusion due to complex new rules and the requirement to navigate a new filing process.
For the first time, several new tax deductions are set to become available, targeting various forms of income, including overtime pay, tips, car loan interest, and additional breaks for seniors aged 65 and older. However, these new deductions come with specific restrictions that many taxpayers may not fully understand without careful review.
To claim these deductions, taxpayers will need to fill out a new Schedule 1-A form, which was only available in draft form online as of late December. It is important to note that the IRS will not accept draft forms for filing purposes, which could further complicate the process for many already unfamiliar with the new requirements.
In another significant change, the IRS plans to discontinue issuing paper checks for federal tax refunds to most individual taxpayers. This means that those who have traditionally received their refunds by mail will need to switch to direct deposit methods. For individuals without bank accounts, prepaid debit cards or digital wallet options will be available, with limited exceptions also having been outlined.
As of now, the IRS has not announced the official start date for the 2026 tax season, although a slight delay in the nationwide kick-off is anticipated. In 2025, the tax season commenced on January 27, and experts speculate that similar or slightly later timing may apply this year. The IRS has faced staffing challenges, including significant job cuts and leadership changes during the past year, which could further affect the efficiency of processing returns.
Traditionally, a largely engaged chunk of taxpayers eagerly file their returns early in the season to secure their refunds. In the early days of the last filing season, over 13.1 million tax returns were submitted, and more than 3.2 million refunds processed, with an average refund amounting to around $1,928 at that time.
This year, considerable speculation surrounds the potential for larger refunds, with White House officials suggesting that the 2026 tax season could see record-high refund amounts. The average federal income tax refund is projected to increase significantly due to newly enacted tax breaks under what is referred to as the “One Big Beautiful Bill Act.” This law provides multiple deductions retroactive to January 1, 2025, and aims to ease the tax burdens for various demographics.
According to the Tax Foundation, while many individuals may benefit from these changes, the true size of the refunds will largely depend on personal circumstances and the new eligibility rules associated with the available deductions. For instance, the introduction of an additional $6,000 deduction for seniors, a new deduction for up to $25,000 in tip income, and various others could offer substantial financial relief for eligible taxpayers.
Despite these potential increases, the refund process will also necessitate careful planning from taxpayers, particularly regarding the newly mandated direct deposit information. Individuals are encouraged to familiarize themselves with the necessary steps to ensure their refunds are processed promptly to avoid delays inherent in not providing accurate banking details.
With the potential for significant changes ahead and the IRS advising individuals to prepare their banking information well in advance, many taxpayers are set to navigate a complex filing process in the coming months. Early preparation and understanding of the new requirements could make a substantial difference in ensuring optimal financial outcomes during this tax season.
