2026 is shaping up to be a landmark year for income tax refunds. Changes in the One Big Beautiful Bill Act (OBBBA) passed last summer could help you see a significant boost in your federal return.
In fact, some analysts predict an average refund increase of $675, with many middle-income households seeing a jump of $1,000 or more. This is largely because the IRS withholding tables weren’t adjusted mid-year to account for these new breaks, meaning you may have overpaid throughout 2025.
New Opportunities to Lower Your Taxable Income
The OBBBA introduced several “above-the-line” deductions, meaning many of these can be claimed in addition to the standard deduction. Here is a breakdown of the new incentives that might apply to you and your family:
- Overtime Pay Relief: If you worked any overtime last year, you can now deduct the “half” portion of your time-and-a-half pay (up to $12,500). This applies to those with a modified adjusted gross income (MAGI) under $150,000.
- Support for Homeowners (SALT): For those who itemize, the cap on State and Local Tax (SALT) deductions has been raised from $10,000 to $40,000.
- American-Made Auto Interest: Did you purchase a new American-made vehicle in 2025? You may be eligible to deduct up to $10,000 in auto loan interest, provided your MAGI is under $100,000.
- Gratuity Deductions: If you or a family member works in a qualifying service occupation, up to $25,000 in tip income may now be deductible (subject to income limitations).
- Senior Tax Benefit: Taxpayers aged 65 or older can claim an additional $6,000 deduction, provided their MAGI is below $75,000.
Remember as an AlliedFCU member, you also have access to discounts from Turbo Tax and H&R Block to help you take advantage of the tax breaks for which you qualify.
Note: This information is not tax advice. Tax laws are complex and individual situations vary. We highly recommend consulting with a qualified tax professional to see which of these new deductions may apply to your specific filing status.
