President Donald Trump says your 2026 tax refund will be big and nice. Forecasts show refunds could be $1,000 more than last year. Here’s a cheat sheet to get more bang for your buck this tax season. – MarketWatch Photo Illustration/Getty Images
President Donald Trump sought to allay Americans’ concerns about affordability on Wednesday, saying payback from his trillion-dollar tax law was quickly approaching.
“Next spring is expected to be the biggest tax refund season ever,” Trump said while touting the Big Beautiful Act he signed into law last summer.
Income tax refunds are likely to be much higher, according to predictions from investment analysts, economists and mass-market tax preparation experts. Some estimates say households could receive an additional $1,000 in their 2026 refunds. The average refund this year is $3,052, according to IRS data.
The coming windfall comes from a series of changes in the Big Beautiful Act, which will cost $3 to $4 trillion over the next decade. There are new temporary deductions for tipped and overtime workers and a new bonus deduction for seniors. New tax breaks create new planning opportunities for homeowners, parents of young children and donors to charities.
In the final weeks of 2025, there is still time for people to make year-end tax moves to take advantage of changing tax laws, reduce their tax bills and further increase their refunds.
Year-end tax planning is an annual ritual for accounting and consulting firms such as CBIZ, said Mark Baran, managing director of the National Tax Agency. He said this year was busier than previous years and offered more opportunities due to the arrival of Beautiful Big Bill.
“When you look at the potential opportunity, the number could be huge,” Baran told MarketWatch.
The upcoming tax season will be the first test of the true benefits of the Trump administration’s massive tax law. Here’s a year-end cheat sheet to help you make the most of it.
What do overtime and tips paid by workers, senior citizens, homeowners and car buyers have in common? They all need to stay under certain income limits to fully benefit from the new tax breaks.
For example, for someone age 65 or older who wants to take advantage of the $6,000 premium bonus deduction, the income limit is $75,000. A married couple seeking a combined deduction of $12,000 would be $150,000. Families who want to receive the full $40,000 in state and local tax credits must keep their household income below $500,000.
The limits vary by tax deduction, but in all cases the income limit refers to your “modified adjusted gross income.” For almost everyone, their modified adjusted gross income is the same as their adjusted gross income. Here’s how to find your modified adjusted gross income so you know whether you qualify for these new tax breaks.
Experts say the self-employed and retired have the most control over when their income hits their bank accounts. Deferring invoices or portfolio withdrawals until early January 2026 can keep them below a certain income level and help them qualify for certain tax breaks.
But W-2 workers cannot slow wages to strategically stay below a certain income level. Their options for lowering their taxable income may also be limited. For example, increasing your 401(k) contributions will achieve that goal. But there’s often an administrative lag before salary changes take effect. By the end of 2025, there may not be enough time to make changes.
Between 5 million and 7 million additional households will itemize their taxes in 2025 and 2026 due to more generous state and local tax breaks (often called the SALT break). By 2029, write-offs will quadruple to at least $40,000, but can only be claimed if you itemize.
It may be more tempting to itemize for higher deductions, but the widely used standard deduction is also growing. When choosing between the standard deduction or itemized deductions, the key is to choose the path that best reduces your taxable income.
In order to claim the SALT deduction in 2025, some taxpayers may have to “bundle” their charitable contributions – that is, make many contributions in the same year – so that they can itemize on their 2025 taxes. One reason to do this in 2025: Starting in 2026, the amount a charity can qualify for itemized deductions will decrease.
Donating to charity will result in greater tax benefits for most people starting in 2026, when families taking the standard deduction will be able to take a charitable deduction of up to $1,000 for individuals or $2,000 for married couples.
The new law applies tax deductions such as the tip deduction, a $6,000 premium bonus and a higher SALT deduction to 2025 taxes. The legislation also strengthens the child tax credit, increases the standard deduction and curbs tax rate increases. In other words, people’s taxes are being cut, but few are adjusting once payroll withholding is established. This means they may end up paying more when taxes are deducted from their paychecks throughout the year. Voila: The 2025 rebate is even bigger.
Some critics say tax refunds are nothing to celebrate because they are taxpayers paying back overpayments. One strategy to avoid refunds is to change your payroll withholding amounts to pay less tax throughout the year and have more money front-loaded in your paycheck. Payroll experts say the withholding changes won’t be that simple, especially given the nuances of the new law.
It’s best not to rush into changing your withholding amounts. Consider consulting a professional first. The potential negative impact of a withholding tax calculation error could be underpayment of tax, resulting in a heavy tax liability and possible penalties.
For those who want a bigger paycheck instead of a large refund but don’t want to modify their withholdings, waiting may pay off. Erica York, vice president of federal tax policy at the Tax Foundation, said withholding schedules will change in 2026 so that people could potentially see tax cuts through higher take-home pay.
The “senior bonus” is the new tax law’s response to Trump’s campaign promise that Social Security would not be taxed. This provision does not exempt Social Security payments from taxes. This is an additional deduction that helps reduce a senior’s overall taxable income.
Some financial planners say this provides an opportunity to convert more of your pre-tax retirement savings into after-tax savings. These Roth conversions require some planning and an educated guess as to how much a person will be taxed now versus in the future.
Like other new tax breaks, the premium bonus is available until 2028. Consultants say people considering turbocharging a Roth conversion through the tax break need to start looking into whether it’s right for them.
Big changes are coming to federal income taxes, but that doesn’t necessarily mean every state will make the same changes to its own state income tax rules.
Brian Myers, chairman of the AICPA’s State and Local Taxation Committee, said many state legislatures finalized budgets and recent income tax provisions before the BEAUTY Act passed. He explained that there are a series of laws that guide when (and if) state income tax rules follow federal ones.
He said some states, such as Michigan, have passed laws reflecting the new federal tax breaks. But Myers said it remains an open question how many other states will now handle their tax rules, particularly whether they will also offer tip and overtime deductions.
He said a good move for workers who qualify for tip and overtime deductions might be to wait a while before applying. If lawmakers in their state change rules affecting tips and overtime pay, workers may not need to file an amended state return.
Parents and legal guardians can open tax-deferred “Trump accounts” for their children starting in July. The accounts can be opened for any child under 18, but under the new law, U.S. citizen babies born between 2025 and 2028 will have $1,000 deposited into their accounts for free. Philanthropists and employers can also donate.
Parents cannot claim a tax deduction for their contributions. But they may get some tax help, depending on their employer’s actions and IRS rules. Under the proposed rules, workers would be able to deposit pre-tax funds into these accounts.
Amber Salotto, managing director of RSM US’s national tax practice in Washington, said that by 2026, employers will be scrambling to understand the fine print of their accounts and whether they are worth paying. Families still need to know more details, she said.
Parents can use various tax-advantaged investment accounts for their children, she said, and contributions to the Trump account could raise certain tax issues. Seed funding is big business, though. “People are curious about what exactly these Trump accounts are about and whether they actually provide a savings strategy for minor children.”
