Larger tax refunds predicted for millions as new IRS rules come into effect

Big changes this year include new deduction for seniors

Americans can expect to see bigger tax refunds this year, thanks to new rules at the Internal Revenue Service.

The IRS began accepting 2025 federal tax returns Monday with the 2026 tax season the first to be impacted by changes from the Big Beautiful Bill Act, which was signed into law last summer.

About 75 percent of Americans receive refunds each year with the average in 2025 being $2,939, according to IRS data. Refunds this year could jump as much as 30 percent due to President Donald Trump’s new tax bill, USA Today reported.

Some of the biggest changes include higher state and local tax (SALT) deduction limits and a new tax break for seniors. Experts are urging Americans to take note of the changes, as they may be entitled to extra benefits.

“Any time people have big life changes or there are law changes, people can miss benefits they’re entitled to,” Andy Phillips, the vice president of H&R Block’s Tax Institute, told the Wall Street Journal.

Americans may see bigger tax refunds this year, thanks to new rules at the IRS (Getty Images)

Under the new rules, Americans 65 and older who pay taxes on Social Security income can now claim a $6,000 federal deduction through the 2028 tax year.

Meanwhile, married couples where both spouses qualify can claim up to $12,000.

Some workers can now deduct qualified overtime pay, capped at $12,500, or $25,000 for a joint return.

Workers who earned tips may also qualify for a deduction of as much as $25,000. However this likely won’t be reported on a W-2 form, according to the Journal. Taxpayers claiming the new deductions for seniors, tips and overtime pay will instead use the new Schedule 1-A form when filing their 2025 returns, according to Axios.

The new tax bill also temporarily raises the cap on the state and local tax (SALT) deduction to $40,000, up from $10,000. The change will allow some higher-income taxpayers in high-tax states to deduct more on their federal returns.

Meanwhile, the standard deduction for 2025 is $15,750 for single filers and $31,500 for married couples filing jointly. Last year’s tax law raised those by $750 and $1,500, respectively, along with the IRS’s typical adjustments for inflation.

Taking the standard deduction is the best financial option for most taxpayers, though this year’s changes might have some Americans better off itemizing their deductions, according to the Journal.

The new law also raised the maximum child tax credit to $2,200 per child.

Last year’s law also saw the creation of a new type of retirement account, called a Trump account, which the government will contribute $1,000 into for each child born from 2025 through 2028.