Tax Season 2026: What Changed and What You Should Do About It

Tax season is a decision point, not just a filing deadline. Below are the most important changes for 2025 taxes filed in 2026, and the specific decisions each one creates for you.

1) The standard deduction went up. Stop itemizing if you are close to the line.

For tax year 2025, the standard deduction is $31,500 (Married Filing Jointly), $15,750 (Single), and $23,625 (Head of Household).

The decision: If your itemized deductions are within $2,000 of the standard deduction, take the standard deduction. The time, complexity, and audit risk of itemizing is not worth a marginal difference. If your itemized deductions clearly exceed the standard deduction by $3,000 or more, itemize.

If you are a homeowner near the line: Unless you had a major deductible event this year (large medical bill, significant charitable donations), the higher standard deduction means you should stop forcing itemization. Take the simpler path.

2) Tax brackets shifted. Adjust your withholding now.

The IRS updated 2025 tax brackets for inflation. If your income stayed roughly the same, you may owe slightly less. If your income jumped, check where you land.

The decision: If you got a large refund last year (over $1,500), you are giving the government a free loan. Reduce your withholding so you keep more in each paycheck. If you owed money, increase your withholding now so you are not surprised next April. File a new W-4 with your employer this month.

If your side income grew: Set aside 25-30% of every payment for taxes. Do not guess. Open a separate savings account and transfer the percentage automatically. Quarterly estimated payments (Form 1040-ES) keep you from getting hit with penalties.

3) Child Tax Credit: up to $2,200 per child. Put the refund to work.

For 2025, the Child Tax Credit is up to $2,200 per qualifying child. The refundable portion (Additional Child Tax Credit) can be up to $1,700 per qualifying child.

The decision: If you get a refund, split it into three moves:

1. Cover anything urgent. Past due rent, utilities, insurance lapse. Handle it first.
2. Build or top off an emergency fund. $500-$1,000 minimum. If you cannot cover a $400 emergency today, this is the priority.
3. Attack your highest-interest debt. Credit cards first. Every dollar you put toward a 20% APR card earns you a guaranteed 20% return.

Do not spread the refund across "nice-to-have" spending. Concentrate it on one move that changes your financial position.

4) EITC: up to $8,046. Do not let it disappear.

For 2025, the maximum Earned Income Tax Credit is $8,046 (three or more qualifying children) and $649 (no qualifying children).

The decision: If you qualify for the EITC, this may be the largest single cash infusion you receive all year. Treat it like a financial reset, not a windfall. The priority order is the same: urgent bills, emergency fund, high-interest debt. If you have car trouble that threatens your ability to get to work, fix it now.

5) 1099-K threshold: track your side income now.

Payment apps and marketplaces report on Form 1099-K when payments exceed $20,000 and 200 transactions.

The decision: If you sell online or take side payments, set up tracking now for 2026. Open a separate bank account for business income. Use a simple spreadsheet or free bookkeeping app. Track every expense that reduces your taxable income. The people who get burned by 1099-K are the ones who did not track expenses and cannot prove deductions.

6) Clean vehicle credits got tighter. Do the math without the credit.

If a vehicle was placed in service after Sept. 30, 2025, you must have acquired it on or before Sept. 30, 2025 to claim the credit.

If you bought an EV before the deadline: Keep contracts, proof of payment, and delivery documents organized. You will need them to support the claim.

If you missed the window: The credit is gone. Run the total cost of ownership without it. If the EV still wins on fuel savings, maintenance, and monthly payment, buy it. If the math only worked with the credit, it does not work.

7) Business mileage: 70 cents per mile. Pick your method now.

The 2025 standard mileage rate for business is 70 cents per mile.

The decision: Standard mileage vs. actual expenses. If you drive a newer, fuel-efficient car, standard mileage usually wins. If you drive an older car with high maintenance costs, actual expenses may give you a larger deduction. Pick one method for 2026 and start tracking from day one. You cannot go back and reconstruct a year of mileage logs in April.

Got a refund? Here is exactly what to do with it.

Do not spread it thin. Concentrate it on the move that changes your financial position the most:

1. Cover anything urgent. Past due rent, utilities, insurance lapse. If something is about to be shut off or sent to collections, handle it first.
2. Build a $500-$1,000 emergency fund. 37% of adults cannot cover a $400 emergency. If that is you, this is the priority. Everything else can wait.
3. Pay off your highest-interest debt. Credit cards first. Every dollar toward a 20% APR balance earns you a guaranteed 20% return. No investment beats that.
4. Then and only then, invest or spend. If steps 1-3 are covered, put the rest toward long-term goals or something you have been putting off.