Will Your Tax Refund Be Bigger or Smaller in 2026?

Why Would Your Refund Be Bigger in 2026?

Changes in tax law will change the way your taxes are calculated. In 2025, three big changes are most likely to have an impact: new deductions, higher standard deductions and inflation-adjusted tax brackets. Here's how these break down.

One Big Beautiful Bill Act Deductions

Four new tax deductions may help lower your tax bill (and increase your refund) as a result of the OBBBA. All four new deductions—for tips, overtime pay, new car loan interest and an additional deduction for seniors—have income limitations. All four are available whether you itemize or claim the standard deduction. And all three are temporary: They're effective from 2025 to 2028.

Here's some additional detail:

• Deduction for tips: Employees and self-employed people who receive qualifying tip income may deduct up to $25,000 per year in tips. Regular recipients of qualified tips include foodservice, hospitality and personal service workers.
• Deduction for overtime pay: You can deduct up to $12,500 of overtime pay that exceeds your regular rate of pay (such as the "half" portion when you're paid time-and-a-half).
• Deduction for new car loan interest: If you bought a new vehicle in 2025, you may be eligible to deduct up to $10,000 in car loan interest. The vehicle must meet eligibility requirements and be purchased for personal use.
• Additional deduction for seniors: Seniors ages 65 and older may claim an additional deduction of $6,000 (or $12,000 if married filing jointly). This new deduction is in addition to the additional standard deduction for seniors that was already in effect.

Larger Standard Deduction

In addition to new deductions, standard deductions have been adjusted for inflation twice for 2025. The IRS announced regular 2025 inflation adjustments in the fall of 2024. Then, standard deductions for 2025 were adjusted again with the passage of the OBBBA. Here's how new 2025 standard deductions compare to the standard deductions from 2024.

Source: IRS

Larger standard deductions help lower your tax bill by reducing your taxable income. With the latest round of adjustments, new 2025 standard deductions are 7.9% higher than their 2024 counterparts. For illustration's sake, a $1,150 reduction in taxable income translates to $253 in tax savings if you're in the 22% tax bracket.

Adjusted Tax Brackets

The IRS also adjusts tax brackets for inflation, which can reduce the amount of tax you pay by taxing more of your income at lower rates. For 2025, tax brackets have been adjusted by about 3%.

Learn more: What Are the New Tax Brackets?

Example: Because it can be hard to visualize how tax bracket adjustments might change your tax bill, here's a quick example. Amy is single and makes $120,000 a year. Using the standard deduction, she has $105,400 in taxable income in 2024 and $104,250 in 2025. Thanks to a larger standard deduction and adjusted tax brackets, Amy stands to save $472 on her taxes in 2025, even though her income hasn't changed. Here's how her tax bill works out:

Note: Based on $120,000 in income and single filing status

Other Reasons Your Refund May Be Larger or Smaller

Tax laws don't have to change for your refund to fluctuate. Any changes to your income or withholding can affect the size of your refund. Here's a short list of possible tax-related developments that could make a difference:

• You got a new job, promotion or raise. Making more money could push a portion of your income into a new tax bracket or disqualify you from certain tax credits. Also, making more money gives you more income on which to be taxed. On the other hand, a pay cut could lower your tax bill—and potentially increase your refund.
• You changed your filing status. Whether you're newly married, newly single or a new parent, changes to your filing status affect your standard deduction and, therefore, how much tax you owe.
• You're newly eligible for tax credits. You adopted a child. You started paying for childcare so you can work. Your kid started college. Each of these milestones could make you newly eligible for a tax credit—namely, the adoption tax credit, the child and dependent care credit and the American opportunity tax credit.
• You're no longer eligible for tax credits. The same principle also works in reverse: If your child turned 17 this year, for example, you may no longer qualify for the child tax credit.
• You started a business or side gig. You're required to pay taxes on any net income you make running your own business, doing gig work, selling items online (for a profit) or freelancing. If profits were up, you may owe more than expected. If you overestimated your business income, you may get some money back.
• You changed your withholding or estimated taxes. Broadly speaking, your refund is the difference between the tax you owe and the money you paid in throughout the year through paycheck withholding and estimated taxes. If you adjusted your withholding or moved your estimated tax payments up or down, your refund might be affected.
• You sold your home. Selling your home for more than you paid for it generally results in a taxable capital gain.
• You bought a home. If you itemize deductions on your tax return, you can deduct home mortgage interest on the first $750,000 of your home loan. That could be a little over $48,000 in mortgage interest deductions if you have a $750,000 loan at 6.5%.
• You invested in stocks or cryptocurrency. If you tried your hand at investing in cryptocurrency, stocks or any number of investments, the capital gains you made are taxable. Interest or dividends you earned are also taxable.
• You changed your retirement. Whether you upped your 401(k) contribution, opened an individual retirement account (IRA), converted a traditional IRA to a Roth or began taking retirement distributions, changes to your retirement can affect your taxes.

How to Maximize Your Tax Refund

Though there are many ways to try to bring down your tax bill—and pump up your refund—these are some of the most common (and thus most likely to apply). Here are five quick ways to maximize your refund.

• Mind the deadline. Avoid IRS penalties for late filing by making sure you file your taxes on time. Personal tax returns for 2025 are due April 15, 2026, or October 15 if you file for an automatic extension.
• Set up direct deposit. The IRS began phasing out paper refund checks in September 2025. To get your deposit quickly, be prepared to include bank account information with your tax return so you can receive your refund via direct deposit.
• Claim tax credits. Check to see which tax credits you're eligible to claim. This may be your last chance to claim clean vehicle tax credits: They're going away for vehicles purchased after September 30, 2025.
• Try itemizing deductions. Most taxpayers take the standard deduction. However, if you have large deductions, such as home mortgage interest or deductible medical expenses, itemizing can be worth your while. Try adding up your potential deductions to see whether they beat the standard deduction for your filing status.
• Contribute to a tax-advantaged account. You can lower your taxable income by making a contribution to your 401(k) retirement plan at work, a traditional IRA or a health savings account. Each of these types of accounts has annual contribution limits, so check to make sure you don't over-contribute.

Learn more: What Can You Deduct on Your Taxes?

How to Prepare for Tax Season

The IRS typically begins accepting returns in late January. Until then, follow these four steps to prepare yourself for filing season.

1. Get Your Records Together

Gather the documents you'll need to file your taxes: W-2 forms from your employer, 1099-INTs reporting interest, 1099-NEC forms for non-employee compensation and 1099-K forms for online business transactions you did through third-party payment networks (such as Venmo). You can collect most forms online; 1099s sent by mail often arrive around the end of January.

Tip: If you're reading this in 2025, you may still have time to make key tax moves that can increase your refund. Qualify for potential deductions and credits; contribute to retirement, health savings or charity; harvest investment losses; and more.

2. Find Help

If you need help sorting through tax provisions or making sense of your tax records, get help. These sources are a great place to start:

• IRS.gov has a wealth of information, including informative web pages, fillable tax forms, detailed tax publications and interactive tax assistants that guide you through common tax issues. It's not light reading, but it is information straight from the source.
• Tax preparation software walks you through the preparation process, step by step. You'll get easy-to-fill forms and automated Q&As that help you identify potential deductions and credits. Starting early can be helpful, in case you need to track down forms or additional information to complete your return.
• A qualified tax advisor can provide support and guidance when you need it. Although a tax advisor can help with even the simplest of tax returns, you may find working with a tax pro especially useful if you own your own business, itemize your deductions, make extra income doing a side gig or need to report income from investments.

Learn more: How to File Your Taxes for the First Time

3. Set Up an IRS Account

Setting up an online account with the IRS allows you to make and schedule payments, apply for payment plans and request tax transcripts of your recent tax returns. You can also use your IRS online account to request an identity protection PIN (IP PIN), a six-digit code that confirms your identity with the IRS and helps prevent someone else from committing tax fraud using your identity.

4. File and Track Your Refund

Once your taxes are filed, track your refund status using the IRS' Where's My Refund? online tool. Your refund status is typically available 24 hours after you e-file a current-year return, three or four days after you e-file a prior-year return, or four weeks after you file a paper return.

The Bottom Line

With so many factors in play, the only way to know for sure what your refund will be is to do your tax return. When you're finished, get your refund ASAP by filing electronically, choosing direct deposit and making sure your tax return is accurate and complete. If you accidentally enter the wrong information or claim a deduction you aren't entitled to, you may trigger an IRS inquiry that will slow your refund down.

The fastest and safest way to receive your tax refund is through IRS direct deposit to a bank account. If you don't have a checking account, consider the Experian Smart Mone^™ Digital Checking Account. The Experian Smart Money^™ Digital Checking Account & Debit Card can help you build credit without debt by linking to Experian Boost^®ø, which gives you credit for eligible bill payments after three months of payments. See terms at experian.com/legal.