Tax Refunds Could Be Bigger in 2026, But There's a Catch

The IRS hasn't said when it'll start accepting 2025 tax returns yet, but tax season is coming soon.

Last year, the IRS started accepting returns on January 27. Tax experts think we might see a delay this year, maybe pushing the start to early February.

The average tax refund hit $3,052 in 2025. Refunds in 2026 could be larger for people who qualify for new deductions, but there are big changes that will confuse a lot of people.

No More Paper Checks

Biggest change: The IRS won't send tax refunds by paper check anymore to most people. If you've been getting paper checks, you need to set up direct deposit or wait a really long time for your refund.

Don't have a bank account? You can use prepaid debit cards or digital wallets. The IRS says limited exceptions exist, but good luck figuring those out.

Only 7% of people got refunds by check anyway, so there's a good chance you're already set up for paperless payments.

New Tax Breaks

Several new tax breaks showed up for the first time on 2025 tax returns. President Trump signed the One Big Beautiful Bill Act on July 4. Many tax breaks are retroactive to January 1, 2025.

Here's what could boost your refund:

• $6,000 extra deduction if you're 65 or older. Starts phasing out at $75,000 income if single, $150,000 for married couples.

• Auto loan interest deduction up to $10,000. Very specific rules though. You had to buy a new car in 2025 with final assembly in the United States.

• Deduction for up to $25,000 in tip income. Phases out when you earn more than $150,000 if single or $300,000 if married.

• Deduction for up to $12,500 in overtime income for singles or $25,000 for couples. Same phase-out as tips.

• Child tax credit increase of $200.

• Standard deduction increases by $750 for singles and $1,500 for couples.

You Need a New Form

You'll need to file a new form called Schedule 1-A to claim tax breaks for overtime, tips, seniors and car loans. This form was only available as a draft in late December. You can't file a draft with the IRS.

The good news is you can claim these tax breaks even if you take the standard deduction.

How Much Bigger Will Refunds Actually Be

Kevin Hassett from the White House said people will get "massive refund checks" and predicted "the biggest refund cycle ever in the history of America."

The Tax Foundation says hold on. Refunds will be higher for some people who qualify for new tax breaks, but not everyone will see huge increases.

The IRS didn't change withholding tables after the law passed. Workers kept withholding more taxes from paychecks than needed. Instead of getting the benefit gradually through higher paychecks all year, most people will get it all at once when they file returns.

The Tax Foundation thinks the new tax cuts could add somewhere between $300 to $1,000 to average refunds. That could mean an average refund around $4,000 under the right conditions.

But that average hides big differences. Some people will benefit a lot from new tax breaks. Others will see tiny changes.

When You'll Get Your Refund

The IRS usually sends most refunds in less than 21 days after you file electronically and use direct deposit. Some arrive even earlier.

Returns claiming the earned income tax credit face delays by law. Those refunds can't be issued until after mid-February.

Set Up Direct Deposit Now

For 2025 returns, you'll be asked to provide direct deposit information or prove you qualify for an exception. If you usually got a paper check, set up direct deposit before you file or open an account in advance.

When you e-file, you'll get an alert if banking information is missing. Returns will still be accepted without direct deposit info, but refunds will be delayed.

After filing, the IRS will send you a letter within 30 days requesting banking information if your return doesn't include it. After six weeks, the IRS will send a paper check to prevent interest from building up on the refund amount.

What It Comes Down To

Tax season 2026 will be different. The IRS had job cuts and leadership changes in 2025. New tax breaks sound good but come with complicated rules most people won't understand without help.

Start gathering paperwork early. Set up direct deposit if you haven't. Don't expect filing to be easy like previous years.

Refunds might be bigger. They might not be. Depends entirely on your situation and whether you qualify for the new deductions. Marketing says massive refunds. Reality says some people will see big increases, others won't.

And pack your patience. You're going to need it.

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