2025-2026
The IRS has announced it will start accepting returns as early as Jan. 26, 2026. Several tax law changes may affect your 2025 tax return. Some deductions are larger, new deductions are available, and a few filing rules have changed. Here’s a clear summary of what matters most.
Higher Standard Deduction
The federal income tax brackets remain the same, but the standard deduction is higher for 2025:
- Single filers: about $15,750
- Married filing jointly: about $31,500
- Head of household: about $23,625
A higher standard deduction means more of your income may be shielded from taxes.
Larger State and Local Tax (SALT) Deduction — Temporary
For 2025, the limit on deducting state and local taxes has increased from $10,000 to $40,000.
- The cap increases slightly each year through 2029
- Phase-outs begin for households with income over $500,000
- After 2029, the cap is scheduled to return to $10,000
This change mainly benefits homeowners in high-tax states. Some taxpayers who previously took the standard deduction may benefit from itemizing again.
Child Tax Credit Increase
Families with children may qualify for a larger child tax credit in 2025:
- Up to $2,200 per qualifying child under age 17
- Up to $1,700 may be refundable for eligible lower-income families
The credit begins to phase out at:
- $200,000 for single filers
- $400,000 for married couples filing jointly
Each child must have a valid Social Security number authorized for work. Co-parents should coordinate in advance to avoid duplicate claims and filing delays.
What is the difference between Tax Preparation and Tax Planning? Click here to find out.
Additional Deduction for Taxpayers Age 65+
Taxpayers age 65 or older may qualify for an extra $6,000 deduction for tax years 2025 through 2028.
- Phase-out begins at $75,000 (single) or $150,000 (joint)
- Fully phased out at $175,000 (single) or $250,000 (joint)
This deduction can significantly reduce taxable income for retirees, especially when combined with other age-based deductions.
New Deductions and New Tax Forms
The new tax law introduces several deductions that may apply even if you do not itemize.
Vehicle Loan Interest
- Deduct up to $10,000 per year of interest on qualifying vehicle loans
- Vehicle must meet specific eligibility rules, including U.S. assembly
- Available from 2025–2028
Tip Income and Overtime Pay
- Deduction for up to $25,000 of qualifying tip income
- Deduction for overtime pay:
- $12,500 for single filers
- $25,000 for married filing jointly
These deductions rely on accurate employer reporting and are claimed on new IRS schedules, not directly on Form 1040.
IRS Direct File Discontinued
The IRS will not offer its Direct File program for the 2026 filing season.
Taxpayers seeking free filing options may use:
- IRS Free File (if eligible)
- Volunteer programs such as VITA or Tax Counseling for the Elderly (TCE)
- IRS Free Fillable Forms
Some commercial software may charge filing fees.
Is Tax Planning right for you? Find out here.
Updated 1099-K Rules for Payment Apps
Payment platforms will now issue Form 1099-K only if:
- Total payments exceed $20,000, and
- You have more than 200 transactions in the year
This change reduces reporting for casual sellers. Business owners and frequent sellers may still receive a 1099-K and should keep clear records to separate taxable income from personal transfers.
Full Equipment Expensing for Business Owners
For 2025, businesses may again deduct 100% of the cost of qualifying equipment.
- Applies only to equipment placed in service after January 19, 2025
- The date the equipment is first used—not purchased—determines eligibility
How to Prepare for Filing
Because of new deductions and updated rules, this filing season may look different than prior years.
We recommend:
- Reviewing withholding or estimated tax payments
- Gathering all tax documents early
- Filing as soon as you’re ready to avoid delays
Refund amounts vary by taxpayer, but many filers may benefit by claiming all available deductions under the new law.
The IRS says it will no longer issues paper refund checks – Direct Deposit is a must. Read about the New Rules here!
For taxpayers without a traditional bank account, ask us how you can receive your tax refund faster than a check on a FasterMoney® Discover® Prepaid Card.
