What's Happening?
The Internal Revenue Service (IRS) has announced that it will begin accepting tax returns for the 2026 tax season starting January 26. This early start is part of an effort to manage the expected high
volume of filings, as the IRS is currently understaffed. Taxpayers are encouraged to file early to avoid delays in processing and receiving refunds. New tax changes for 2026 include an increase in the state and local tax (SALT) deduction from $10,000 to $40,000, and exemptions for tips and overtime income under President Trump's One Big Beautiful Bill Act. These changes are expected to impact taxpayers differently, with significant benefits for those in high-tax states who own property, while middle-class renters may see little benefit.
Why It's Important?
The early filing date and new tax changes are significant as they could influence the financial planning of millions of Americans. The increase in the SALT deduction is particularly beneficial for property owners in high-tax states, potentially reducing their taxable income significantly. However, the complexity of the new exemptions for tips and overtime income requires meticulous documentation, as the IRS will not assume accuracy without proper records. The expectation of higher refunds could provide a modest economic stimulus in the first two quarters of the year, but financial experts warn that larger refunds may not equate to overall financial benefit, as they reflect money that could have been used throughout the year.
What's Next?
Taxpayers are advised to prepare their documentation early and file as soon as possible to avoid processing delays. The IRS's understaffing could lead to significant backlogs, affecting the timing of refunds. Financial advisors recommend that taxpayers review the new tax changes carefully and consult with professionals if needed to ensure they maximize their returns and comply with the new regulations. The broader economic impact of these changes will depend on how taxpayers utilize their refunds and adjust to the new tax landscape.
