If you’re filing your 2025 tax return this year, you might notice something unexpected: a bigger refund than usual.
Several IRS tax law changes that took effect in 2025 are now showing up on returns filed in 2026. The Tax Foundation estimates that average refunds could be $300 to $1,000 higher than last year thanks to these tax refund changes.
But not every taxpayer will see the same impact. Some of these updates are targeted at specific groups — seniors, tipped workers, overtime earners, families with children, and homeowners in high-tax states. Here’s what you need to know.
What changed — and why refunds are bigger
The main source of the changes was the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025. The bill introduced new deductions, expanded existing credits, and raised deduction limits. Many of these changes were retroactive to January 1, 2025.
Because these changes happened partway through the year, the IRS didn’t update employer withholding tables until 2026. That means that most workers effectively overpaid their federal income taxes all year.
That overpayment will show up as a larger refund (or a smaller balance owed) when you file. Beginning in 2026, updated withholding tables will reflect the new tax cuts in paychecks going forward, so the refund bump is largely a one-time event.
Here’s a breakdown of other major IRS tax changes: What actually changed, who it helps, and how much difference it might make on your return.
1. Higher standard deduction for (almost) everyone
The OBBBA permanently extended and increased the standard deduction amounts from the 2017 Tax Cuts and Jobs Act. This affects just about everyone who takes the standard deduction, which is roughly 90% of filers.
For 2025, the standard deduction rose to $15,750 for single filers (a $750 increase), $23,625 for heads of household, and $31,500 for married couples filing jointly (a $1,500 increase).
A higher deduction reduces your taxable income, which lowers the amount of tax you owe. The Bipartisan Policy Center estimates savings of about $75 to $278 for single filers, or $150 to $555 for married couples, depending on your tax bracket.
2. A new deduction just for seniors
This is one of the most meaningful new provisions for older Americans. The OBBBA created a temporary deduction — available for tax years 2025 through 2028 — that allows qualifying seniors to deduct up to $6,000 per person from their taxable income. For a married couple where both spouses are 65 or older, that’s up to $12,000 combined.
This change was designed to help offset taxes that seniors pay on Social Security benefits.
This deduction starts to phase out once modified adjusted gross income exceeds $75,000 for single filers or $150,000 for married couples filing jointly. It phases out entirely at $175,000 (single) or $250,000 (joint).
If you qualify, the impact on your refund could be significant. A single senior in the 22% bracket could save around $1,320 in taxes from this deduction alone.
Springfour
If you’re looking for some more financial guidance, you can use a free online tool like SpringFour. It may be able to connect you with resources in your community to help you navigate tax season.
If you’re looking for some more financial guidance, you can use a free online tool like SpringFour. It may be able to connect you with resources in your community to help you navigate tax season.
3. No tax on tips
Workers in jobs where tipping is standard — servers, bartenders, hairstylists, valets, rideshare drivers, and similar roles — can now deduct up to $25,000 in qualifying tips from their federal taxable income. The IRS has a list of qualifying occupations.
This is a deduction from your income taxes, not a free pass on all taxes. You’ll still owe payroll taxes (Social Security and Medicare) on your tips. And mandatory service charges added to a bill don’t count — only voluntary tips qualify.
For tipped workers, this could be a big change. Someone in the 24% bracket with $25,000 in qualifying tips could save up to $6,000 in income taxes. According to estimates from the Tax Policy Center, about five million taxpayers are expected to benefit, with an average tax cut of around $1,400 — another contributor to tax refund changes 2026 for service-industry employees.
4. No tax on overtime
Hourly workers whose overtime is covered by the Fair Labor Standards Act can deduct up to $12,500 per person ($25,000 for married couples filing jointly if both spouses qualify). If you’re salaried and exempt from FLSA overtime rules, this one probably doesn’t apply to you.
The deduction covers the “half-time” premium portion of overtime pay. Same income phaseouts apply: $150,000 MAGI for single filers, $300,000 for joint filers.
If you regularly work overtime, this adds up. A worker in the 22% bracket who claims the full deduction could save about $2,750 on their taxes. Like the tips deduction, payroll taxes still apply, but the income tax savings are real.
5. Larger Child Tax Credit
Parents and guardians with kids under age 17 can take advantage of this credit. The credit begins phasing out at $200,000 in modified adjusted gross income for single filers and $400,000 for joint filers.
Per the OBBBA,the Child Tax Credit increased from $2,000 to $2,200 per qualifying child. The refundable portion (the Additional Child Tax Credit) also went up, to $1,700 per child. So even if you don’t owe any federal income tax, you can still receive up to $1,700 per child as a refund.
An extra $200 per child doesn’t sound like a lot on its own, but it’s a dollar-for-dollar credit, not just a deduction. For a family with three kids, that’s $600 more off your tax bill. And the higher refundable amount means lower-income families who owe little or no tax could see a bigger check, too.
6. Higher SALT deduction cap for itemizers
People who itemize their deductions and pay a lot in state and local taxes can take advantage of this change. If you’re in a high-tax state like New York, California, or New Jersey, your ears should perk up.
The cap on state and local tax (SALT) deductions jumped from $10,000 to $40,000. That’s a massive change if you’ve been bumping up against the old cap since 2018. The full deduction phases down for taxpayers with MAGI above $500,000.
This is one of the largest potential tax savings, but it applies to a smaller group of taxpayers. Someone in the 32% bracket who can now deduct $40,000 instead of $10,000 could save up to $9,600 more in taxes.
If you own property in a high-tax state and you’ve been frustrated by the old cap, this year’s return might feel very different.
Why your tax withholding matters
A bigger refund doesn’t necessarily mean you got a huge tax break. In a lot of cases, it just means you overpaid throughout the year and the IRS is giving it back.
Because the 2025 tax changes were retroactive and withholding tables weren’t updated until 2026, most workers had too much tax taken out of each paycheck last year. Your refund is essentially the IRS returning that overpayment.
Going forward, the updated 2026 withholding tables should mean slightly larger paychecks throughout the year. If you’d rather get more in each paycheck than wait for a big refund next year, consider reviewing your W-4 with your employer. But be careful not to reduce your withholding too much — you don’t want to end up owing money when you file.
Will refunds be delayed in 2026?
With so many changes to process, it’s natural to wonder if the IRS will take longer to issue refunds this year. The filing season opened on January 26, and the deadline is April 15.
If you file electronically and use direct deposit, the IRS says most refunds should arrive within 21 days. However, if you’re claiming the Earned Income Tax Credit or the refundable portion of the Child Tax Credit, refunds typically aren’t issued until mid-February by law.
If you file electronically and choose direct deposit, the IRS says most refunds arrive within about 21 days, so it’s important to make sure your banking information is up to date when you file.
These changes, combined with any tax bracket changes that may apply to your income level, will determine whether you see a higher or lower refund in future years.
The bottom line
There are real changes this year that could put more money back in your pocket. How much depends on your situation — your income, your age, the kind of work you do, and whether you have kids.
If you’re a senior, a tipped worker, a parent, or someone who regularly logs overtime, it’s worth taking a closer look at these new deductions and credits. Even if the only change that affects you is the higher standard deduction, that’s still a little more money coming back your way.
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