The 2026 tax filing season officially begins on January 26, the IRS announced this week, and it comes with the most significant changes to tax deductions in decades. Taxpayers who earned tips, worked overtime, bought a new car, or are 65 and older could see meaningfully larger refunds this year.

Here's what you need to know to maximize your return.

When Can You File?

The IRS will begin accepting and processing individual tax returns on Sunday, January 26, 2026. However, if you qualify for IRS Free File (adjusted gross income of $84,000 or less), you can submit your return starting Friday, January 9.

The filing deadline remains Wednesday, April 15, 2026, for most taxpayers.

The New Schedule 1-A: Major New Deductions

This year, taxpayers will use the new Schedule 1-A to claim deductions enacted under the One Big Beautiful Bill Act. These represent some of the most taxpayer-friendly changes in recent memory:

No Tax on Tips

Workers who receive tips—from restaurant servers to hotel staff to rideshare drivers—can now deduct their tip income entirely. This applies to tips reported on Form W-2 and could save eligible workers thousands of dollars.

No Tax on Overtime

Overtime pay earned beyond 40 hours per week is now deductible. For hourly workers who regularly work overtime, this could represent substantial tax savings.

Car Loan Interest Deduction

Taxpayers can now deduct up to $10,000 in car loan interest—but with important restrictions. The vehicle must be new (not used) and must have final assembly in the United States. This deduction targets both American manufacturing and new car affordability.

Enhanced Senior Deduction

Taxpayers 65 and older receive an additional $6,000 deduction on top of the standard deduction. However, this benefit phases out for single taxpayers with modified adjusted gross income over $75,000 and joint filers earning above $150,000. This temporary deduction applies from 2025 through 2028.

"Many taxpayers could see a bigger tax refund in 2026 due to retroactive changes enacted via Trump's multitrillion-dollar legislation. After the law passed in July, the IRS didn't update withholding tables for employers, which could mean bigger-than-usual refunds for some filers."

Trump Accounts: The New IRA for Children

While "Trump Accounts"—a new savings vehicle for children—won't go into effect for 2025 contributions, eligible families can elect into the program on their 2025 tax return by filing Form 4547 with their 1040. Children born between January 1, 2025, and December 31, 2028, are eligible.

Paper Checks Are Going Away

In a significant change, the IRS began phasing out paper tax refund checks on September 30, 2025, in accordance with Executive Order 14247. Most taxpayers must now provide bank routing and account numbers to receive their refunds via direct deposit.

If you don't have a bank account, consider opening one before filing or look into prepaid debit card options that accept direct deposit.

Higher 401(k) Limits for 2026

While not directly affecting your 2025 return, the IRS announced that 401(k) contribution limits for 2026 have increased to $24,500, up from $23,500 in 2025. Start planning now to maximize your retirement savings.

Concerns About IRS Capacity

There's a caveat to the optimism: the IRS workforce has shrunk significantly. The National Taxpayer Advocate reported that staffing fell from 102,113 workers at the end of the Biden administration to 75,702 currently.

Senators have warned that the 2026 filing season "will present a huge test for the IRS." This means:

  • Potential delays in processing, especially for paper returns
  • Longer wait times for customer service
  • Greater importance of filing accurately the first time

How to Prepare Now

The IRS recommends several steps before filing season opens:

  • Gather documents: Collect W-2s, 1099s, and records for deductions
  • Create an IRS online account: Access personal tax information, transcripts, and payment history
  • Verify your banking information: Ensure direct deposit details are accurate
  • Track your tips and overtime: Document these new deductible categories
  • Keep car loan statements: If you bought a qualifying new vehicle

The Bottom Line

The 2026 tax season brings genuine opportunities for larger refunds, particularly for service workers, overtime earners, new car buyers, and seniors. But with a strained IRS, filing early, accurately, and electronically has never been more important.

Visit IRS.gov/GetReady for the agency's full preparation checklist, and consider consulting a tax professional if you're unsure how the new deductions apply to your situation.