The 2026 Tax Season Is Different
If you are filing your 2025 tax return this April, you are in for some good news. The One Big Beautiful Bill (OBBB) signed into law brought major tax changes that apply to your 2025 return due April 15, 2026. Many of these changes put real money back in your pocket.
Here are the 7 biggest changes and exactly how to take advantage of each one.
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1. SALT Deduction Quadrupled to $40,000
The state and local tax (SALT) deduction cap jumped from $10,000 to $40,000 for tax years 2025 through 2028.
Who benefits most: If you live in a high-tax state like California, New York, New Jersey, Connecticut, or Illinois, this is the biggest change for you. Previously capped at $10,000, you can now deduct up to $40,000 in state income taxes and property taxes combined.
What to do: If your SALT deductions exceed the standard deduction threshold, switch from standard to itemized deductions this year. Use our Income Tax Calculator to compare both options.
Example: A homeowner in New Jersey paying $15,000 in property taxes and $12,000 in state income taxes was previously capped at $10,000. Now they can deduct the full $27,000.
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2. Bigger Standard Deduction
The OBBB added an extra 5% increase on top of the normal inflation adjustment:
| Filing Status | 2024 | 2025 (New) | Increase |
|---|---|---|---|
| Single | $14,600 | $15,350 | +$750 |
| Married Filing Jointly | $29,200 | $30,700 | +$1,500 |
| Head of Household | $21,900 | $23,000 | +$1,100 |
Even if you do not itemize, you automatically get a larger deduction this year.
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3. New Deduction for Overtime Pay
For the first time, overtime income gets its own deduction. If you earned overtime pay in 2025, you can deduct a portion of it from your taxable income.
The numbers: The Tax Policy Center estimates 17 million taxpayers will claim this deduction, with an average tax savings of about $1,400.
What counts: Overtime pay as defined by the Fair Labor Standards Act (time-and-a-half for hours over 40/week). Use our Overtime Calculator to see how much overtime you earned.
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4. Tip Income Deduction
Workers who earn tips can now deduct tip income from their federal taxes. This is a game-changer for restaurant workers, bartenders, valets, and other tipped employees.
How it works: You report your tips as income (as before), but now get a corresponding deduction that effectively makes tip income tax-free at the federal level.
Use our calculator: Check your Take-Home Pay Calculator to see the impact on your paycheck.
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5. $6,000 Seniors Deduction
Americans aged 65 and older get a brand new $6,000 deduction on top of the standard deduction. This stacks with the existing elderly/blind additional deduction.
For a married couple both 65+: Combined with the higher standard deduction, you could be looking at over $40,000 in total deductions before itemizing anything.
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6. Charitable Giving Without Itemizing
Starting with your 2025 return, you can claim charitable cash donations even if you take the standard deduction:
- Single filers: Up to $1,000
- Joint filers: Up to $2,000
This is new. Previously, you had to itemize to get any charitable deduction. Now everyone benefits.
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7. IRA Contribution Deadline Is April 15
You still have until April 15, 2026 to make tax-deductible contributions to a Traditional IRA or HSA for the 2025 tax year.
2025 IRA limits:
- Under 50: $7,000
- Age 50+: $8,000
A $7,000 Traditional IRA contribution in the 22% bracket saves you $1,540 in federal taxes. Use our Roth IRA Calculator to compare Roth vs Traditional options.
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How Much Could You Save?
Here is a realistic example for a married couple in New York:
| Tax Change | Savings |
|---|---|
| Higher standard deduction | $330 |
| SALT deduction (if itemizing) | $2,000-$5,000+ |
| Overtime deduction | $1,400 (average) |
| Charitable giving deduction | $440 |
| IRA contribution | $1,540 |
| Total potential savings | $5,710 - $8,710+ |
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Common Filing Mistakes to Avoid in 2026
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Tools to Help You File Smarter
- Income Tax Calculator — See your federal and state tax bill
- Paycheck Calculator — Check your withholding accuracy
- Take-Home Pay Calculator — Calculate net pay after all deductions
- 401(k) Calculator — Maximize retirement contributions
- Roth IRA Calculator — Compare Roth vs Traditional before April 15
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Frequently Asked Questions
When is the 2026 tax filing deadline?
April 15, 2026 for your 2025 tax return. You can file an extension until October 15, but any taxes owed are still due April 15.
Should I itemize or take the standard deduction?
If your SALT (state/local taxes + property taxes) plus other itemized deductions exceed the standard deduction ($15,350 single / $30,700 married), itemize. The new $40,000 SALT cap makes this worthwhile for many more people.
Can I still contribute to my IRA for 2025?
Yes, you have until April 15, 2026 to make IRA contributions for the 2025 tax year.
Is overtime really tax-free now?
Not entirely tax-free, but there is a new deduction that reduces the tax burden on overtime pay. The average savings is about $1,400 per year for eligible workers.
Do I need to do anything special to claim the new deductions?
Most tax software will be updated to include the new deductions. Make sure you are using 2025 tax year forms (not 2024).