Millions of Americans will collect bigger tax refunds this filing season, thanks to an assortment of new tax breaks legislators introduced in a landmark tax and spending bill last summer. Affluent households are more likely to benefit the most.
Taxpayers will inevitably have questions — and the Internal Revenue Service has far fewer staffers to answer them this year. The agency is more than 25 percent leaner than it was last tax season, which could strain customer service.
There’s a lot to consider. The new law made permanent some of the expiring tax breaks that legislators passed during President Trump’s first term, including a larger standard deduction. It also introduced several that you probably heard about. “No taxes on tips and overtime” sounds simple, but it’s more complex (and less generous) in practice.
The bill stands to reduce individual taxes by $129 billion in 2025, according to estimates from the Tax Foundation. The average taxpayer should receive a tax cut of $611, according to those estimates. The typical refund may be as much as $1,000 more than usual.
Here’s a rundown of the largest changes to consider as the filing deadline, April 15, approaches. We’ve included a lot of links to I.R.S. documents and other guides where you can go deeper on a particular topic.
And one programming note: When we refer to a “tax year,” this is what we mean: If we’re describing “tax year 2025,” that’s the year of financial activity you are summing up on the tax forms that you file the following year.
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 Mr. 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 percent 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 percent 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 percent of your adjusted gross income.
Seniors are getting an extra tax break. How does it work?
People who are 65 and older (by Dec. 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.
I bought a new car. Am I eligible for a break?
That largely depends on your income and where the car was assembled.
If you bought a new vehicle in 2025 for personal use, or plan to before the end of 2028, you may be eligible to deduct up to $10,000 in interest that you pay that tax year on debt that you incurred for the purchase. (Vehicles includes new cars, minivans, sport utility vehicles, pickup trucks and motorcycles.)
But there are limitations: The deduction begins to phase out for single filers with modified adjusted gross incomes of more than $100,000 (or more than $200,000 for married couples filing jointly) — and the vehicle must undergo final assembly in the United States.
You can find the assembly location by checking the vehicle label at the dealership, through the vehicle identification number or through the National Highway Traffic Safety Administration’s website.
This is also open to filers who do not itemize their deductions.
How has the child tax credit changed?
For the 2025 tax year, the child tax credit is now worth up to $2,200 per qualifying child under 17, up from $2,000, but it declines for married joint filers if their modified adjusted gross income exceeds $400,000 or $200,000 for singles and heads of household.
It gets complicated, but some people may be able to get some money in the form of a refundable credit: up to $1,700. That means if the credit reduces the amount of taxes you owe to zero, any remaining credit would come back to you as a refund.
At least one parent’s Social Security number, along with the child’s, is necessary to qualify. (The I.R.S.’s Interactive Tax Assistant can help determine eligibility.)
Are the tax breaks that help defray caregiving costs changing?
Yes, but not for the 2025 tax year — they become more generous in 2026.
Here’s how they work in most cases: If you paid someone to care for a child under the age of 13 — or another dependent, like a disabled spouse, older disabled child or aging parent — so that you could work or look for work, you may qualify for the child and dependent care tax credit.
For tax year 2025, you can claim 20 to 35 percent of qualified expenses, up to a maximum of $3,000 for one qualifying dependent, or $6,000 for two or more. For tax year 2026, you can claim up to 50 percent of those expenses, and more filers will capture a larger portion of the credit than in 2025, depending on their income.
There are too many nuances to list here, but here’s a big one: You can’t double-dip if you’re using an employer-provided dependent care flexible spending account. That allowed you to set aside a maximum of $5,000 in pretax dollars per household for tax year 2025 and has jumped to $7,500 for tax year 2026.
The federal government is offering free money to young children. Is my child eligible?
Last year’s tax bill created so-called Trump accounts, which are tax-deferred investment accounts for children under 18 that allow parents, guardians and others to contribute up to $5,000 annually.
Many children may be eligible for some free money.
Here’s what’s on offer: For U.S. citizens born between Jan. 1, 2025 and Dec. 31, 2028, the government will provide a one-time contribution of $1,000 (the money will land in open accounts automatically, but not until July at the earliest). Some employers and others are providing their own contributions.
Older children may also benefit: Michael and Susan Dell have said they will seed the accounts of children born in 2016 and through 2024 with $250, as long as they live in ZIP codes where median household incomes are below $150,000.
To get any of the free money, you’ll have to open an account first — and you can do that via your federal tax return. You’ll need to fill out I.R.S. Form 4547 (which you can also submit through a government portal after you file your taxes).
To learn more about how the accounts work, check out our primer from last year and the White House’s FAQ. H&R Block also explains the mechanics in detail on its website.
Will adoptive parents benefit from any changes?
Yes. Families who paid adoption expenses can take a credit of up to $17,280 per child, and the credit became partially refundable in tax year 2025 via last year’s new law. That means filers can get up to $5,000 of the credit back — in other words, it reduces the taxes you owe and you get anything back that is left over as a refund.
A separate tax break lets adoptive families exclude up to $17,280 in employer-provided financial assistance from their income. Households can combine the two breaks, as long as they’re used for different expenses. If you take the exclusion, you have to use that up first.
These tax breaks, however, have limitations for higher-income taxpayers.
What about ‘no tax on tips’?
If you work in a job where tipping is typical, then you may be able to deduct up to $25,000 of your tips from your federal income taxes for tax years 2025 through 2028. But other taxes (like for Social Security and Medicare) could still apply.
There are other nuances: Tips must be voluntary — servers who receive an automatic 18 percent for waiting on big tables, for example, couldn’t deduct that. But they are permitted to deduct any extra tip they receive above the automatic amount.
The tax break, which requires a Social Security number, is reduced for single filers with modified adjusted gross income over $150,000 (or $300,000 for joint filers). Filers who are married but filing separately are not eligible.
People who own or work for what the I.R.S. calls a “specified service trade or business” — which include occupations like accounting, law and health care — are also ineligible.
What about overtime?
Eligible workers who receive overtime pay may be able to deduct up to $12,500 annually (or $25,000 for joint filers) on their federal tax return. But the break doesn’t eliminate your liability — payroll taxes, and perhaps state and local taxes, will still apply.
Simply clocking overtime doesn’t make you eligible. The deduction only applies to workers covered under the Fair Labor Standards Act, a federal law that requires a minimum wage and overtime pay for work exceeding 40 hours weekly. It’s best to check with your employer.
Workers who do qualify can deduct only the earnings that exceed their regular pay — the “half” portion of “time and a half,” in other words. (If an employer pays more than time and a half, however, the law prevents that extra amount from being deductible.)
Starting next year, it should be easier to determine that amount, because employers will have to specify any eligible overtime on your W-2 form.
This year will be trickier. While some employers may give you a separate statement showing your overtime, not all will — and some workers may need to analyze their pay stub, said Andy Phillips, vice president at the Tax Institute, part of H&R Block, and it’s wise to double check with any benefits department or payroll provider.
There are also income limitations: The full deduction amount is available to single filers with modified adjusted gross income of up to $150,000 ($300,000 for joint filers) — above that, the deduction declines.
You need a Social Security number to be eligible, married people filing separately are ineligible and the benefit runs from tax years 2025 through 2028.
Is it too late to get tax breaks for an electric vehicle or solar panels for my home?
For the 2026 tax year, the federal tax breaks for electric vehicles and a variety of home improvements that help people use less energy or create less environmental damage will be disappearing.
Last year, however, many tax breaks were available that you can take advantage of now, for the last time (at least until a different Congress brings them back). The rules were complicated, and we published three articles about them in 2025 that you can consult for more detail.
If your state has an income tax, all may not be lost. Many states have their own tax incentives, both for vehicles and for a variety of things related to your residence.
What’s happening with those pass-through deductions for people who own businesses?
The big tax bill passed in 2017 created a new deduction for owners of many small businesses. It was supposed to expire at the end of last year.
But last year’s tax bill extended (and slightly expanded) it. That means owners of these so-called “pass-through” businesses will continue to benefit from the tax break, which allows them to deduct up to 20 percent of their qualifying business income.
My student debt was canceled last year. Are there any tax implications?
You’re in luck. Canceled student debt usually counts as taxable income (there are exceptions, including for debt that goes away via the Public Service Loan Forgiveness program). But a temporary tax break made loan discharges from the 2021 through 2025 tax years exempt from federal taxation (some states may apply their own taxes).
If you reached the end of a federal income-driven repayment plan in 2025 and haven’t had your loans officially forgiven yet, you will still be eligible for the break — as long as you had enough qualifying payments in tax year 2025 that brought you past the forgiveness threshold, experts said.
I bought or sold crypto. Anything I should know?
Crypto and taxes can be complicated. The I.R.S. had already required you to report any capital gains or losses tied to crypto or other digital assets on your federal tax return.
But for tax year 2025, crypto exchanges and brokerages are required to send taxpayers a new form, called the 1099-DA, which will detail taxable transactions that they must report.
If you receive a 1099-DA, that means you sold, exchanged or redeemed digital assets, tax experts said, or maybe you used crypto or other digital coins to pay for something. Make sure to double-check that you haven’t missed any texts, email messages or other alerts telling you to log in to an account to download the form.
The form is designed to help calculate your tax liability. But there is a quirk, at least for the 2025 tax year: While the form will include your proceeds, your cost basis — or the amount you originally paid for the assets — may not be on the form. (Brokers will have to report much of this information for the 2026 tax year.)
That means you may need to track that information down yourself or use a tool to properly calculate any gains or losses, said Andy Phillips, vice president of H&R Block’s Tax Institute. Otherwise, you risk paying the wrong amount.
Please tell me that the alternative minimum tax has not come back. (Pretty please.)
It’s back. We’re sorry. And it could cause you to pay more in taxes for tax year 2026 than you might have the previous year, all things being equal.
As a reminder, the alternative minimum tax, or A.M.T., is what it says — another way of calculating individuals’ tax liability to make sure that high-income people pay at least something.
The big tax bill in 2017 helped nearly everyone avoid getting stuck paying the A.M.T. But the 2025 tax bill changed the math. It’s complicated, but people with income over $500,000 in tax year 2026 will now be more likely to have to pay the A.M.T. This is especially true for people who live in a state with high income taxes, get incentive stock options at work and have a lot of capital gains.
It’s important to consider the A.M.T. now, not at tax time next year. If there’s a chance that you might end up in A.M.T. territory, you can plan around factors that you may be able to control.
Consider hiring a human being to help with A.M.T. planning. Software and artificial intelligence may not be good at it.
Any other updates or last words of advice?
Plenty. We’re nerds.
You can no longer use the I.R.S.’s Direct File program to do your taxes for free with the agency itself. Its Free File program still exists, however, for eligible people.
Filing returns on paper is always a bit dodgy. Will your return get lost? Stolen? Mired in delays in some remote I.R.S. mail center? And this year, these returns may face even longer delays given the agency’s reduced staffing.
Wondering where your refund is? Check the I.R.S. website first.
Speaking of refunds, bad actors often file fake returns in other people’s names and steal the refunds. Fixing the problem can take years. The I.R.S. can issue you a PIN to use that can help prevent this from happening. Ron wrote an article about the process last year.
And speaking of problem-fixing, the I.R.S. uses voice technology when people call the agency for help. Plenty of callers dislike it. If you are among them, good luck to you if you wish to talk to a human during tax season.
If you need to call the I.R.S., keep in mind that you may reach inexperienced people — like employees on loan from human resources or the tech department, according to the trade publication Government Executive.
But if you must call, try the trick you may have used with Ticketron in the 1980s to chase front-row seats for Journey concerts. Start calling 60 seconds before the opening minute and keep at it until you get through.
There’s a decent chance the wait will be short. And if you end up with a tax refund, you can use that money to go see a concert.
Journey is playing in Spokane on April 15.
Tara Siegel Bernard writes about personal finance for The Times, from saving for college to paying for retirement and everything in between.
The post It’s Time to File Your 2025 Tax Return. Here’s What to Know. appeared first on New York Times.
