President Donald Trump says your 2026 tax refund will be big and beautiful. Projections show refunds could be $1,000 larger than last year. Here’s a cheat sheet to make this tax season pay off even more. – MarketWatch photo illustration/Getty Images
As President Donald Trump tried to allay Americans’ affordability concerns on Wednesday, he said the payoffs are approaching fast from his multitrillion-dollar tax law.
“Next spring is projected to be the largest tax refund season of all time,” Trump said, touting the One Big Beautiful Bill Act, which he signed into law this past summer.
Income-tax refunds will likely be much higher, according to projections from investment analysts, economists and mass market tax preparation experts. Households could rake in an extra $1,000 in their 2026 refunds, some estimates say. The average refund this year was $3,052, according to Internal Revenue Service figures.
The imminent windfall comes from the heap of changes in the One Big Beautiful Bill Act, which will cost between $3 and $4 trillion over the next decade. There are new, temporary deductions for workers who receive tips and overtime pay, as well as a new bonus deduction for seniors. The new tax breaks create new planning opportunities for homeowners, the parents of young children and those donating to charity.
In the final weeks of 2025, people still have time to make year-end tax moves to take advantage of the changing tax laws — and reduce their tax bills and increase their refunds even more.
Year-end tax planning is an annual rite at accounting and advisory firms like CBIZ, said Mark Baran, a managing director in the firm’s national tax office. This year is busier and presents more opportunities than usual, given the arrival of the One Big Beautiful Bill, he said.
“The numbers could be enormous when you look at the potential opportunities,” Baran told MarketWatch.
The upcoming tax season will be the first test of the real benefits of the Trump administration’s massive tax law. Here’s a year-end cheat sheet for making the most of it.
What do workers paid overtime and tips, senior citizens, homeowners and car buyers have in common? They all need to stay under certain income limits to reap the full benefit of new tax breaks.
For instance, there’s a $75,000 income limit for a person at least 65 who’s eyeing the $6,000 senior bonus deduction. It’s $150,000 for a married couple seeking the combined $12,000 deduction. A household that wants the full $40,000 state and local tax deduction has to stay beneath a household income of $500,000.
The limits vary depending on the tax break, but in all cases, the income limits refer to your “modified adjusted gross income.” For just about everybody, their modified adjusted gross income is the same as their adjusted gross income. Here’s how to find your modified adjusted gross income, so you can see if you qualify for those new tax breaks.
Self-employed workers and retirees have the most control over when income reaches their bank accounts, experts say. Delaying invoices or portfolio withdrawals until early January 2026 could keep them just under certain income levels and help them qualify for certain tax breaks.
But W-2 workers can’t slow their paychecks to strategically stay under certain income levels. They may also have limited options for lowering taxable income. For example, increasing 401(k) contributions will accomplish that goal. But there’s usually an administrative lag before a payroll change takes effect. This late into 2025, there may not be enough time to make the change.
Anywhere from 5 million to 7 million extra households will be itemizing their 2025 and 2026 taxes due to a much more generous deduction on state and local taxes (often referred to as the SALT deduction). The write-off is quadrupling to at least $40,000 through 2029, but you can only claim it if you itemize.
Itemizing to get a higher deduction may be more tempting, but the widely used standard deduction is also growing. When choosing whether to take the standard deduction or itemize, the key is to go the route that will reduce your taxable income the most.
To claim the SALT deduction for 2025, some taxpayers may have to “bunch” their charitable contributions — meaning, make many contributions in the same year — so that they can itemize them on their 2025 taxes. One reason to do this in 2025: Starting in 2026, the amount of charity that’s eligible for an itemized deduction will shrink.
Donating to charity will come with more tax perks for most people starting in 2026, when households taking the standard deduction will be able to get a charitable deduction that’s worth up to $1,000 individually or $2,000 for married couples.
The new law makes tax breaks like the tip deduction, the $6,000 senior bonus and the higher SALT deduction apply to 2025 taxes. The statute also sweetened the child tax credit, increased the standard deduction and kept tax rates from rising. In other words, people’s taxes are being cut, but very few people adjust their paycheck withholdings once they are set. That means they might end up overpaying when taxes are taken out of their paychecks throughout the year. And voilà: a larger 2025 tax refund.
A refund is nothing to celebrate, some critics say, because it is a taxpayer’s repayment of overpaid taxes. One strategy to avoid a refund is to change your paycheck withholding amounts to pay less tax over the year and have more money in your paycheck upfront. Payroll experts say withholding changes are not so simple, especially with the new law’s nuances.
It’s better not to rush into changing your withholdings. Consider consulting a professional first. The potential downside of a miscalculation on withholdings could be underpaying your taxes, leading to stiff tax liabilities and possibly a penalty.
Waiting could pay off for people who want more in their paychecks instead of big refunds — but who don’t want to tinker with their withholdings. The 2026 withholding tables will change so that people potentially see the tax cuts through higher take-home pay, according to Erica York, vice president of federal tax policy at the Tax Foundation.
The “senior bonus” is the new tax law’s answer to Trump’s campaign promise of “no tax on Social Security.” The provision doesn’t exempt Social Security payments from taxes. It’s an extra deduction that helps reduce a senior’s overall taxable income.
Some financial planners say this presents a chance to convert more pretax retirement savings to an after-tax nest egg. These Roth conversions require some planning and educated guesses on how much a person will be taxed now versus in the future.
Like other new tax deductions, the senior bonus is only available through 2028. People considering turbocharging their Roth conversions with the deduction need to start researching whether it’s the right move for them, advisers say.
Big changes are coming to federal income taxes, but that doesn’t necessarily mean each state will make the same changes to its own state income tax rules.
Many state legislatures finalized their budgets and recent income-tax rules before the One Big Beautiful Bill Act passed, said Brian Myers, who chairs the American Institute of CPAs’ state- and local-tax committee. There’s a patchwork of laws guiding when — and if — state income tax rules follow the federal lead, he explained.
Some states, like Michigan, have already passed laws mirroring the new federal tax breaks, he said. But Myers said it’s still an open question what many other states will do with their tax rules now, particularly whether they will also offer breaks on tips and overtime.
A good move for workers who qualify for the tip and overtime deductions might be waiting a little bit before filing, he said. If lawmakers in their state change the rules impacting tip and overtime pay, the worker might avoid having to file an amended state return.
Parents and legal guardians can start opening tax-deferred “Trump Accounts” for their children in July. The accounts can be opened for any child under 18, but U.S. citizen babies born between 2025 and 2028 will get a free $1,000 put into their accounts under the new law. Philanthropists and employers are allowed to donate as well.
Parents can’t claim a tax deduction for their contribution. But they might get some tax help, depending on what their employers do and what the IRS says. Workers may be able to pour pretax money into these accounts, according to proposed regulations.
Employers will be busy in 2026 trying to understand the accounts’ fine print and whether they are worth contributing to, said Amber Salotto, managing director in RSM US’ Washington National Tax practice. Families also need to learn more specifics, she said.
There are all sorts of tax-advantaged investment accounts parents can use for their kids, and Trump Account contributions may raise certain tax headaches, she said. The seed money, though, is a big sell. “People are curious to understand what these Trump accounts are all about and whether they really could offer a savings strategy for their minor children.”
