The United States Supreme Court has concluded its current term with the usual flurry of rulings. This year, SCOTUS heard arguments in disputes ranging from gun rights to birthright citizenship, and, as usual, there's been no shortage of controversy.

However, the Court also issued decisions that can ultimately affect the financial bottom lines of everyday people across the country. These rulings, which involve property rights, the independence of monetary policy, and tariff authority, alter key rules for investors, consumers, and homeowners.

Additionally, a separate tax case that the High Court declined to review leaves heightened IRS audit risk in place for some taxpayers…

Curious? Here’s more of what you need to know about what some of the latest SCOTUS cases mean for your finances.

U.S. Supreme Court opinions for 2026

The following decisions have potential economic implications and arise during a time when many people are experiencing financial uncertainty due to inflation and the rising costs of housing, food, and gas.

These are not the only decisions from the Court this term that could affect your finances.

#1. Local governments don’t have to pay fair market value for foreclosed homes

In Pung v. Isabella County, the U.S. Supreme Court held that when a municipality forecloses on a property for unpaid taxes, “just compensation” under the Fifth Amendment to the U.S. Constitution is measured by the actual auction price — not fair market value.

What happened in the case?

A homeowner, Michael Pung, fell behind on roughly $2,200 in property taxes on his home in Isabella County, Michigan. The county foreclosed and sold the home at public auction for $76,008, despite an assessed market value of approximately $194,400.

Pung argued that keeping the difference between the tax debt and the home's fair market value amounted to an unconstitutional taking of equity. So the dispute centered on how to measure any surplus equity owed to a property owner after a tax foreclosure.

Pung said that compensation should be based on the home's market value, while the county maintained that any surplus should be measured using the amount actually realized at auction.

In a 9-0 ruling issued on June 23, 2026, the Supreme Court agreed with the county, holding that surplus equity from a tax foreclosure is measured by the amount realized at a lawful public auction, not by an estimate of the property's market value.

How this may affect your home

Tax foreclosure risk isn't just about losing a home. It can also mean losing equity.

What this means in practice:

• Property tax debt can put your home and your home equity at risk, even if the amount owed is relatively small.
• If a home is sold at tax foreclosure, you might not get back the difference between what it’s worth and what it sells for.
• Setting up a payment plan or resolving delinquent taxes before foreclosure may help.

#2. Presidential authority is limited when it comes to imposing broad tariffs

In Learning Resources, Inc. v. Trump, the U.S. Supreme Court held that the International Emergency Economic Powers Act (IEEPA) does not authorize the executive branch to impose broad tariffs.

What happened in the case?

As Kiplinger has reported, in 2025, President Donald Trump imposed sweeping tariffs on imports from a wide range of countries, with some duties reaching 25%–60% on certain goods. The administration invoked emergency declarations under the International Emergency Economic Powers Act (IEEPA) to justify the measures, arguing that the statute authorized broad action to address national economic and security concerns.

Importers challenged the tariffs, arguing that the executive branch exceeded its statutory authority. Lower courts, including the U.S. Court of International Trade and the Federal Circuit, ruled that IEEPA does not grant tariff-setting power.

The Supreme Court affirmed those courts in a 6-3 decision on February 20, 2026, holding that tariff authority remains a core congressional power tied to taxation and revenue.

How this could impact your finances

Tariffs function as embedded costs within everyday goods and supply chains.

What this could mean in terms of potential benefits:

• Fewer surprise tariffs or sudden consumer cost spikes due to emergency executive tariff declarations
• More predictable pricing for import-heavy goods
• Tariff refunds for some importers

#3. There may be limits on removal power when it comes to the Federal Reserve

In Trump v. Cook, the U.S. Supreme Court held that statutory “for-cause” protections limit the executive branch’s ability to remove Federal Reserve governors.

What happened in the case?

The Trump administration attempted to remove Federal Reserve Governor Lisa Cook over alleged discrepancies in financial disclosures, a move seen as part of an effort to assert greater control over the Fed.

Lower courts blocked the removal, and the Supreme Court affirmed in a 5-4 ruling on June 29, 2026, holding that Congress may limit removal authority to protect the Federal Reserve’s independence.

How this could affect your finances

Federal Reserve independence is central to how interest rates and credit conditions are set.

• An independent Fed can fight inflation even when it’s politically unpopular to do so.
• That helps keep inflation expectations more stable over time, which supports steadier borrowing costs and economic planning.

Note: This case was part of a broader, sweeping decision (consolidated with a case involving the FTC) where the 6-3 conservative court majority expanded presidential power. The Court overturned decades of precedent (known as Humphrey’s Executor) to rule that a President can fire the heads of most other independent regulatory agencies at will. The Fed was essentially treated in the Cook case as the exception.

Honorable Mention: IRS audit risk can be indefinite for fraudulent returns

In Murrin v. Commissioner, the U.S. Supreme Court declined to review an interesting Third Circuit federal court ruling. That leaves in place a decision allowing the IRS to assess taxes beyond the standard statute of limitations when a tax return contains fraud, even if the taxpayer was unaware of the fraud.

What happened in the case?

A taxpayer, Stephanie Murrin, received a notice of deficiency nearly 20 years after filing her federal income tax returns. (The IRS determined that her tax preparer had inserted fraudulent items that significantly understated her tax liability.)

The court found that she acted in good faith and had no knowledge of the preparer’s misconduct. Still, a $65,318 tax deficiency ultimately grew to more than $328,000 once the IRS applied interest and penalties.

The central dispute was whether the normal three-year statute of limitations barred the IRS from assessing additional tax when fraud was present, even if the taxpayer wasn't personally aware of it.

The Third Circuit Court of Appeals held that Internal Revenue Code Section 6501(c)(1) applies to the return itself — meaning fraud on the return removes the standard three-year limitation period regardless of the taxpayer’s intent or knowledge.

Note: This ruling applies in jurisdictions under the Third Circuit, including Pennsylvania, New Jersey, Delaware, and the U.S. Virgin Islands.

How this might impact your taxes

In Third Circuit states and territories, fraud on a tax return can potentially eliminate the normal IRS audit deadline.

What this means for some taxpayers:

• In Pennsylvania, New Jersey, Delaware, and the U.S. Virgin Islands, fraud-related returns may remain open indefinitely.
• Taxpayers remain responsible for accuracy even when using paid preparers.
• Long-delayed IRS assessments could accumulate significant interest and penalties.
• Strong tax recordkeeping and preparer oversight become more important.

SCOTUS: Bottom line

Supreme Court decisions about money and property often don’t drastically change financial conditions right away, but they set the rules for how taxes are enforced, how agencies are regulated, and where power sits in the financial system.

Over time, those rulings shape how predictable things feel for "regular people" and the balance of authority between Congress and the executive branch.

So, as always, stay tuned as the effects of these and other rulings ripple through everyday life in the months and years ahead.

Related

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• Who Benefits From the Supreme Court's Home Equity Theft Ruling?
• How Long Should You Keep Tax Records?
• U.S. Supreme Court Strikes Down Most of Trump's Tariffs

It's no secret that retirement tax rules can be tricky to master, especially since they often change significantly from how our income was taxed during our working years. And if older adults find retirement taxes confusing, younger workers — who are decades away from retiring — likely feel less prepared.

A study by the Teachers Insurance and Annuity Association of America (TIAA) Institute, a financial research organization, and the Global Financial Literacy Excellence Center (GFLEC) recently highlighted this knowledge gap.

The study revealed that Generation Z (those born between 1997 and 2007) scored an average of just 29% on a "retirement fluency" test. By comparison, Baby Boomers (those born between 1946 and 1964) answered only 44% of the questions correctly.

Inspired by this finding, we decided to look at a specific, crucial piece of the retiree puzzle: retirement taxes. Can retirement-aged individuals prove their experience, or will a younger worker surprise us?

To find out, we tested a Gen Z working professional (28 years old) outside the financial sector with five retirement tax questions.

That person scored a 40%. Now, it's your turn. Good luck!

Hint: This quiz covers federal retirement tax rules and doesn't include how states tax retirees.

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• Learn about how to save on taxes with education tax breaks.
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Weeks away from the official launch of "Trump Accounts," the child savings vehicles from the 2025 tax bill, a targeted spinoff is set to roll out.

Dubbed "Fostering the Future Accounts," this new initiative is designed to help children in foster care save for future housing, educational, and career development costs as they transition to adulthood.

First lady Melania Trump and U.S. Department of the Treasury Secretary Scott Bessent announced in a press release that these new accounts will open on July 4, 2026.

“Fostering the Future Accounts give foster children the same chance for asset ownership and long-term wealth building as every other American child," Mrs. Trump remarked. "By investing in our foster youth now, we help strengthen America’s workforce, communities, and economic future."

But because these accounts will be opened and managed by state infrastructure, states must opt in. Not everyone is on board. Read on for who qualifies and what's holding back the remaining 27 states.

New: Low-Tax States For Middle-Class Families Ranked by Childcare Affordability

Fostering the Future Accounts for kids

The Trump "Fostering the Future Accounts" are an offshoot of standard Trump Accounts structured to help children in foster care save for long-term financial goals, like a down payment on a home or higher education expenses.

To qualify, a child must be:

• Under age 18
• A U.S. citizen with a Social Security number

These accounts might be opened by a state, territorial, or tribal child welfare agency. They can also be opened by designated foster parents or other legal guardians in the foster care system.

Which states are participating?

Because Fostering the Future Accounts are managed at the state level, access depends on local legislative approval. So far, governors in the following 23 states have pledged to offer the program, according to White House officials:

Participating state child welfare agencies must submit IRS Form 4547 (Trump Account Election) to formally open an account for each eligible child in their custody.

Fostering the Future Accounts vs standard Trump Accounts

Although Fostering the Future accounts function the same as a standard Trump Account — investing in stock market index funds to grow tax-deferred savings — there are some nuances in how each is opened and funded.

For instance, when a parent or guardian opens a standard Trump Account, they can claim a $1,000 federal seed deposit directly into the newborn's account, provided their child is born from 2025 to 2028.

However, "a child welfare agency cannot elect to receive the $1,000 pilot program contribution to the child's [Fostering the Future] Account," as the IRS reported in a recent update. Instead, only a foster parent or other qualifying individual who anticipates caring for the child might claim this federal seed money for the child's account.

Here's a table highlighting several other key differences between the two types of accounts:

The Fostering the Future Accounts also have unique funding methods that the federal government doesn't offer for standard Trump Accounts.

For example, state officials can redirect existing state resources — such as unused Temporary Assistance for Needy Families (TANF) block grants — into a foster child's savings, according to the Administration for Children and Families (ACF).

Why isn't my state on the list?

Notably, all 23 states opting into Fostering the Future Accounts are GOP-led, reflecting the partisan divide surrounding Trump Accounts, which were a key component of the 2025 Trump tax bill.

But beyond partisan lines, several other reasons exist for why states might heavily debate signing on:

• Strained budgets. State child welfare departments often depend on federal funding streams such as TANF and the Social Services Block Grant (SSBG) to operate. Because most states have already finalized their budgets for the upcoming fiscal year, adding new, unplanned programs midcycle might be too financially constrained.
• Administrative hurdles. Fostering the Future Account documentation, including individual investment portfolios and private donations for every child, must be monitored. As such, participating state agencies are required to establish new protocols to continuously update this information, which might prove difficult given that children frequently shift between foster homes.
• Legal challenges. Legally, a state, territorial or tribal child welfare agency might open a Fostering the Future account, but the timeline of who holds account management authority can be constantly in flux. If a child is in temporary emergency care, for instance, then switches to kinship care or transitions between different county jurisdictions, it might be unclear who is legally authorized to update the account. (Note: the Treasury and ACF released joint guidance related to this issue.)

Ultimately, the Trump administration has set a target for all 50 states to sign on to Fostering the Future Accounts by December 2027.

However, some child welfare advocates worry that a prolonged state-by-state rollout will deepen economic disparities for children aging out of foster care — especially for children who move across state lines due to interstate adoptions or structural changes in their care.

Ruth Anne White, executive director of the National Center for Housing and Child Welfare, told independent news outlet, The Imprint. "But it's right there in the Child Welfare Policy Manual [released guidance] — as clear as day."

According to data from the National Council for Adoption, there are roughly 330,000 children in the U.S. foster care system. Statistics from the National Foster Youth Institute show that one in five foster youth face homelessness after aging out of the system, and only half secure gainful employment by age 24.

Supporters of the new initiative hope these accounts will disrupt those outcomes.

Yet while supporters have framed Fostering the Future Accounts as a solution to the financial hardships facing youth aging out of care, states will need to overcome complex questions surrounding budget allocations, administrative hurdles and bipartisan support.

Until then, foster parents and child welfare agencies will find that state lines dictate whether children in their care are eligible for these accounts.

Read More

• How to Claim Your Kid’s Trump Account in 3 Steps
• Adoption Tax Credit: What You Need to Know for 2026
• Child Tax Credit 2026: How Much Is It and What's Changed?

It's a tale as old as time: If you live in a high-cost area like Long Island, San Francisco, or Seattle, your paycheck doesn't stretch nearly as far as it would in, say, Pittsburgh. Yet, the IRS taxes your income exactly the same.

A new bill from lawmakers on Capitol Hill would flip that script by linking your federal tax obligations to your home address.

The Cost of Living Tax Cut Act, introduced by House Reps. Laura Gillen (D-NY-04) and Mike Lawler (R-NY-17) would adjust federal income tax brackets based entirely on where a taxpayer lives.

"This bipartisan bill would help lower taxes for families in high-cost areas [like Long Island] by accounting for regional differences in the cost of living and ensuring taxpayers can keep more of what they earn," Gillen said in a recent release.

Lawler echoed the sentiment for his constituents in Hudson Valley, New York, arguing that the tax code should reflect the economic reality of high-cost regions.

Yet while the prospect of localized tax relief sounds promising to families in expensive ZIP codes, the proposal is likely to face heavy scrutiny over who will ultimately foot the bill for the corresponding drop in federal revenue.

Here is a breakdown of how this plan could change your take-home pay, which areas stand to benefit, and what this means for the upcoming mid-term election season this fall.

How the bill adjusts the tax brackets

The Cost of Living Tax Cut Act is designed to prevent households in more expensive regions from being pushed into higher tax brackets when their real purchasing power is relatively low compared with the rest of the U.S. If passed, the bill would take effect after December 31, 2026.

The bill's framework relies on localized data to determine your federal tax liability:

• The index: The bill directs the Secretary of Commerce to use regional price parities (RPPs) to calculate an annual cost-of-living index for metropolitan and rural areas.
• The adjustment: Instead of applying uniform national tax thresholds as it does now, the IRS would expand tax brackets in regions with an above-average cost of living.
• The savings: By widening the lower tax brackets, more of a household's income would be shielded from higher tax rates.

Who wins the affordability contest?

If passed, the Cost of Living Tax Cut Act would provide the most significant relief to major metropolitan statistical areas (MSAs) where the local purchasing power of a dollar is typically lower than the national average.

Per the most recent regional economic metrics from the Tax Foundation, the primary beneficiaries of this new bill would live in regions where a typical $100 has the real purchasing power of only $84 to $90. For example:

• California metros: The San Francisco Bay Area (Oakland, Berkeley, San Jose, Santa Clara), Los Angeles, Orange County, San Diego, and Santa Barbara.
• The Pacific Northwest: The greater Seattle-Tacoma-Bellevue metro area in Washington.
• Northwest corridor: The broader New York-Newark-Jersey City metro area (spanning NY, NJ, and PA), Boston-Cambridge-Newton (MA/NH), and high-cost zones in Connecticut.
• Hawaii and South Florida: Urban Honolulu and the Miami-Fort Lauderdale-Pompano Beach metroplex.

Under the proposed framework, families in the affected ZIP codes would see their tax brackets widened proportionally. Conversely, regions where the cost of living is at or below the national average — like parts of Arkansas, Louisiana, or Ohio — would see no changes to their baseline brackets.

However, federal policy historically requires an offset for targeted tax cuts. Since the legislation bars lawmakers from adjusting tax brackets downward in lower-cost regions, the federal government would have to absorb the resulting deficit, which could eventually lead to spending cuts or the search for alternative federal revenue sources.

The hidden cost of geographic tax cuts

Data published by the Rockefeller Institute of Government reveals that high-wage coastal states subsidize spending in the rest of the nation. For instance, in a single fiscal year, New York residents paid $19.4 billion more to the federal government than the state received, while California taxpayers contributed an extra $72 billion.

So if the federal tax code were to cut taxes for some areas and not others, that might lead to several potential long-term risks:

• A structural drop in federal revenue. Think tanks like the Center on Budget and Policy Priorities often note that targeted tax cuts substantially reduce federal funding for key national obligations like infrastructure, Social Security, and defense.
• Ripple effects in the tax code. Drops in federal revenue could lead to raising baseline tax rates nationwide, implementing broad surtaxes, or risking an increase in the national deficit. This fiscal pressure isn't unique to the federal government; for example, a state-level structural deficit was one reason Washington enacted a millionaire's tax on its wealthier residents.
• Porous boundaries and "tax cliffs." Relying on regional price indexes could create tax spikes right at city borders. For example, a taxpayer living just outside a high-cost metropolitan boundary line who works inside it could face a higher federal tax burden than a neighbor living just one mile away. A similar dynamic already plays out with commuters who live in one state and work in another.
• Increased regulatory burdens. Shifting to an address-based tax system forces the IRS to track, audit, and dynamically update tax brackets across hundreds of MSAs. In an era of $1 billion IRS funding cuts, managing localized federal brackets would heavily strain resources. Furthermore, tax preparation software would need to become more complex, potentially driving up filing costs for everyday taxpayers and increasing the risk of location-reporting errors or geographic fraud.

Bottom line: Will the legislation pass?

Even though the Cost of Living Tax Cut Act addresses a very real financial pressure point for millions of voters, it will most likely face a steep climb to become law.

The proposal must compete against much broader fiscal blueprints, like the 2025 Trump Tax Bill, which focused on making previously enacted individual tax cuts permanent and revamping the federal standard deduction. Adding a localized layer to the IRS tax code could complicate revenue projections and require extensive bipartisan negotiation and spending offsets.

With several congressional seats on the ballot this November and a recent 3.8% inflation surge reported by the U.S. Bureau of Labor Statistics, targeted affordability proposals may take center stage. Even if this specific bill stalls, it highlights a growing legislative focus on how your ZIP code impacts your wallet.

So, before making any sudden moving plans for a cheaper area, wait to see how these fall tax proposals shake out. Your bracket might not change, but your vote could shape future local tax policy.

Read More

• People Are Leaving High-Tax States: Here's Where They're Moving Instead
• New Bill Proposes $1 Million Capital Gains Tax Exclusion for Those Over Age 65
• Are No-Income Tax States Better to Live In?

The graduation caps have been tossed, summer heat has arrived, and graduate celebrations are winding down. But as reality sets in, you might notice a surprising line on your financial dashboard: unspent money in your child’s or grandchild’s 529 plan college savings account.

Roughly 10% of families may end up with surplus 529 funds, according to data from Consumer Reports, often thanks to unexpected scholarships or grants, or by choosing a more affordable school. Fortunately, thanks to the SECURE 2.0 Act, you may be allowed to roll those leftover education funds directly into a Roth IRA without paying federal income tax or a penalty.

Yet it isn't always as simple as moving money from point A to point B. The IRS has strict, fine-print rules regarding timelines, lifetime limits, and account history.

Take our 6-question quiz to find out if you can seamlessly pivot your beneficiary's college savings into a retirement head start — or whether a different tax strategy might make more sense for your family.

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In the wake of large IRS budget cuts and the significant loss of its workforce, is the agency turning into a paper tiger?

Since President Trump began his second term in office, IRS funding has declined precipitously, and there has been a sharp drop in personnel. Congress set the IRS's fiscal year 2026 budget at $11.2 billion, 9% less than the IRS's 2025 fiscal year funding, and House appropriators want to slash it further, to $10.2 billion for 2027. Additionally, the IRS has lost over 20% of its workers since January 2025 through voluntary deferred resignations and layoffs, with even more departures expected this year.

And there's been lots of chaos at the top leadership at the IRS over the past 17 months. The IRS is on its seventh commissioner since January 1, 2025. Scott Bessent, the Treasury Secretary, is also the nominal head of the IRS. But Frank Bisignano oversees all day-to-day operations at the agency. As chief executive officer of the IRS, he essentially acts as the de facto commissioner. Bisignano is doing double duty. He is also the commissioner of the Social Security Administration. Many other high-level officials have also left the IRS.

The IRS's enforcement arm is feeling the brunt of the personnel and funding cuts. Congress has rescinded most of the IRS's $80 billion windfall from 2022's Inflation Reduction Act. And some of the biggest drops in the agency's employee headcount are from its examination and collection groups. The IRS has lost one-in-four of its enforcement workers through voluntary deferred resignations, retirement and layoffs. Many of them were experienced agents and managers with deep knowledge. This lost know-how will be hard to replenish with those employees who remain. And it will only get worse for the IRS. For instance, the Trump administration's fiscal year 2027 budget request for the IRS includes an additional 18% cut in enforcement activities and projects fewer than 25,000 total enforcement employees.

How is the IRS's budget and personnel cuts impacting IRS audits? The overall number of audits is declining. In recent years, the IRS audit rate for individuals was significantly below 1% (for example, the audit rate for 2018 individual returns was 0.3%), and we expect this figure to continue to go down, at least over the next few years.

Many filers are now escaping the audit anvil because of scarcer audit resources. Two prime examples are high-income individuals and partnerships. The number of IRS audits of individuals with $10 million or more of income has fallen from 6,786 in fiscal year 2025 to 2,264 in fiscal year 2026. The number of IRS audits of partnerships has also declined from 3,174 in fiscal year 2025 to 2,932 in fiscal year 2026. The IRS forecasts even further declines in these audits in fiscal year 2027.

AI will help the IRS filter its audit targets

But this does not mean it is a free-for-all for tax cheats. According to leaders at the IRS, there will be fewer overall audits, but the exams that are done will be more targeted.

Data analytics and artificial intelligence use are increasingly the norm in the IRS's enforcement arsenal. Data-mining software can sift through taxpayer data, expose suspicious activity and identify cases for audit. The IRS is relying more than ever on this technology to more precisely identify high-risk noncompliance and to improve efficiency.

We also expect that the IRS will go after low-hanging fruit. One example is refundable credits, such as the earned income credit, American Opportunity credit, the Affordable Care Act's premium tax credit, and the refundable portion of the child tax credit. Most of these audits are done through correspondence, meaning the taxpayer never meets with an IRS employee. They're a bit more cost-effective, since the audit is generally limited to only one or two issues. The IRS also knows that there is lots of money lost each year to erroneous claims of refundable tax credits. The IRS estimated it improperly paid $21.4 billion in refundable credits in fiscal year 2024 alone.

Taxpayers with income-matching discrepancies will also be a prime target of the IRS. The IRS's automated underreporting program matches data on information returns, such as Forms W-2 and 1099, with income amounts reported on individual tax returns. If there is a significant mismatch, the IRS will alert the taxpayer to the issue by sending out a computer-generated CP2000 notice.

High-income nonfilers have been on the list of the IRS's enforcement priorities in recent years, and we expect this trend to continue. The primary emphasis is on individuals who received income in excess of $100,000 but didn't file a tax return.

The IRS will continue to go after abusive tax schemes that it includes on its annual Dirty Dozen tax scams. For 2026, these include:

• Bogus self-employment tax credit promotions
• Overstated withholding
• Abusive noncash charitable contribution schemes, many of them involving the donations of conservation easements
• Refundable tax credits for abusive undistributed long-term capital gains on Form 2439 by investors in real estate investment trusts and mutual funds
• Misleading tax breaks touted on social media: (1) one scheme encourages employees to take the sick and family leave credit, (2) another uses Schedule H, Household Employment Taxes, to seek false refunds, and (3) a third urges filers to claim the fuel tax credit.

There are also audit red flags that could increase the chance of the IRS pulling your return for examination. We'll briefly describe a few of these red flags.

• Taking higher than average deductions. If the deductions, losses, or credits on your return are disproportionately large compared with your income, the IRS may want to take a second look at your return.
• Claiming large charitable deductions. If your charitable deductions are disproportionately large compared with your income, it raises a red flag. Also targeted are conservation easement donations and taxpayers who fail to comply with the substantiation requirements. You can find information on the substantiation rules for charitable donations in IRS Publication 526.  
• Claiming substantial business losses or large deductions on Schedule C.
• Deducting a hobby loss on Schedule C, especially if you have multiple years of losses from the activity and have lots of income from other sources.
• Deducting large rental losses on Schedule C. The IRS is pulling returns of individuals who claim they are real estate professionals and whose W-2 forms or other non-real-estate Schedule C businesses show lots of income.

This first appeared in The Kiplinger Tax Letter. It helps you navigate the complex world of tax by keeping you up-to-date on new and pending changes in tax laws, providing tips to lower your business and personal taxes, and forecasting what the White House and Congress might do with taxes. Get a free issue of The Kiplinger Tax Letter or subscribe.

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"When the robots take over, I hope they think of me fondly."

That tongue-in-cheek internet joke has turned sour with the increasing usage of artificial intelligence (AI).

Today, it's nearly impossible to click through a few pages without encountering an AI overview — a constant reminder of how much our relationship with information has shifted.

But while you might trust an automatic notetaker or suggested recipe, AI's latest trend, "vibe coding," could raise new concerns in the financial world as AI shifts from merely summarizing information to building the very tools we use to manage that data.

Vibe-coded programs are created entirely by talking to an AI assistant in natural language, like English. This approach lets anyone create an application without coding experience, which can be dangerous when unvetted apps are deployed with coding errors, security flaws, or compliance risks.

Confidential information, like tax data or account balances, could be exposed during security breaches or compliance issues, especially when those tools handle sensitive financial workflows. These risks might be even greater among retirement-aged adults, who are particularly targeted by AI tax scams, according to recent McAfee research.

So how do you know what's safely vetted by a financial professional versus produced by robots for you to consume?

From one human to another, here's how to tell the difference.

The problem with vibe coding in financial tools

Vibe coding is a way of building software in which you tell AI the high-level idea or "vibes" of what you want built, and the machine creates the program for you.

The AI does this by feeding your input into a large language model (LLM) like ChatGPT, Claude, or Gemini to translate your instructions into functional source code.

Not only is coding like this a fast and easy way to create a financial app, but it can also quickly generate retirement tax tools like IRA withdrawal optimizers and Social Security benefit calculators.

So what's the problem? Well, whereas "vibing" prioritizes speed, it often sacrifices quality and security.

• AI-generated code notoriously produces 1.7 times more coding issues, like logic errors and security vulnerabilities, than human-written code.
• This is because AI can use up to 10 times the lines of code as a trained programmer to build the same program (paywall).

But you might be thinking:

...Well, that's often easier said than done.

Maybe if you've used Adobe's attempt at "vibe coding" with Dreamweaver, you might know how easy it is to drag and drop a simple rectangle on the screen, only to discover later how much harder it is to sort through the machine-generated code when you want to change the rectangle's color.

(Pardon the tangent; I'm a CPA with computer science experience and so burdened with strange facts.)

In short, these programs need human oversight to be effective tools, which is a trend that financial and tax professionals are already experiencing as they work with vibe-coded tools in their offices. Otherwise, client information could be leaked to the whole internet to see.

Security risks for your retirement tax portfolio

Financial advisors are increasingly using AI to streamline retirement and tax planning. The CFP® Board of Standards has published its own handbook for CFPs to use to "Harnessing AI in the Financial Planning Profession."

Meanwhile, multinational investment firms like BlackRock have built AI into their advisor suites to automate tax-loss harvesting and model retirement outcomes.

AI efficiencies in retirement tax planning can also scan tax returns for overlooked deductions, forecast the top federal tax bracket you'll be in retirement, or even optimize your stock portfolio while you sleep.

Used the wrong way, vibe-coded applications (and AI tools in general) can pose a risk to your retirement savings data:

• Retaining your financial data. If you or your financial advisor uploads your Social Security number, income details, or past tax returns into an LLM, your confidential financial history could become part of the public domain or surface in other users' chats with the AI.
• Compromised retirement accounts. Employees at a financial or advisory firm may use unsecured AI tools on personal laptops rather than vetted, company-approved platforms. This "Shadow AI" lacks proper cybersecurity protocols, potentially leaving sensitive 401(k) and IRA data vulnerable to interception during tax-planning calculations.
• Multi-firm data breaches. AI systems aggregate large data sets on third-party cloud servers to function. If one financial or tax-advisory firm is cyberattacked, the tax data from connected users across all associated firms can be compromised, jeopardizing your data even if the breach didn't occur in your financial advisor's office.
• IRS penalties from AI "hallucinations." AI tools notoriously hallucinate information that sounds legit but is entirely wrong. If blindly followed, this made-up "advice" can lead to noncompliance with federal and state tax agencies, causing you to pay fees, fines, and penalties for faultily reported information (more on that later).

Altogether, unvetted "vibe-coded" apps can lead to significant financial losses for app users, whether you use a financial advisor or not.

Does it get worse? This month, cybersecurity startup RedAccess, which specializes in threat protection against generative AI leaks, reported that 40% of "vibe-coded" web applications identified in their research were actively releasing sensitive information, including financial data, to the World Wide Web.

Platforms like Lovable, Base44, Replit, and Netlify leverage AI to generate functional web applications from simple text prompts — many of these apps are "public-by-default," meaning they were indexed and searchable for the RedAccess team unless a user manually secures them.

RedAccess co-founder and CEO Dor Zvi emphasized the scale of the risk to tech author Andy Greenberg at Wired magazine. "The end result is that organizations are actually leaking private data through vibe-coding applications. This is one of the biggest events ever where people are exposing corporate or other sensitive information to anyone in the world."

Axios reached out to the studied platforms for comment. Lovable spokesperson Samyutha Reddy told Axios that RedAccess did not disclose a list of compromised URLs. Meanwhile, Replit CEO Amjad Masad claimed on X that RedAccess did not share which users were impacted.

How to spot AI-coded apps holding your financial savings

So how do you determine whether your financial savings information is sitting in an unvetted app by your financial planner vs. a "real" application safely vetted by a warm-blooded human being?

Although "vibe coded" isn't a legal term required in your registered financial advisor's paperwork for you to sign, transparency is still mandatory.

Regulators like the Securities and Exchange Commission (SEC) now actively pursue investment advisors for "AI-washing" — or, said another way, overhyping or misrepresenting the use of AI in their financial products.

Yet, depending on how your financial advisor uses AI, a disclosure might not be necessary (though the advisor remains legally liable for AI-washing). If that's the case, here are some "easy tells" to spot a vibe-coded app.

• Hyper-customized. The app does very specific things that generic software can't do (like having niche property management tracking tools).
• The "AI aesthetic." Despite the hyper-specific functionalities, the interface might look as generic as they come (flat layouts, default fonts, gradients, etc.).
• Fast delivery. If you suggest a change and your planner can deliver it the next day, the app may have been vibe coded.

If you have concerns about how AI is used in your relationship with your financial advisor (whether vibe-coded or not), consider asking the following general list of questions:*

1. How is security handled, and where is my data held?
2. Is my data training the AI?
3. How was the app tested?
4. Who owns and maintains the app?
5. Who is responsible for covering losses caused by the AI?
6. How does the AI verify its calculations?
7. What is the human review process?

You should also confirm your advisor's legitimacy by reviewing their Form ADV via the SEC’s website. Additionally, verify specialized certifications — like a CFP® or CFA® — via their respective certifying boards to ensure your advisor meets the highest ethical and educational standards.

If your financial advisor's application (even if vibe-coded) meets regulatory requirements and all other concerns you have, then — great! But if not, you may want to look for a different professional.

*Note: This list is not exhaustive and is compiled from several different sources of industry expert guidance.

Defend against AI-related compliance issues and tax scams

As mentioned, LLMs and AI are known to hallucinate or "make up" information. From a compliance perspective, the IRS doesn't accept "the AI made a mistake" as a legal defense.

So, for example, if the AI you used to prepare your income return "hallucinates" tax write-offs, incorrectly classifies taxable income, or generalizes federal tax laws and ignores your state-specific laws, you will be held liable. This can look like unpaid taxes plus interest and penalties — even if you were simply given "bad tax advice" by the AI.

The Taxpayer Advocate highlighted this when citing a Washington Post review of Intuit TurboTax and H&R Block's AI usage. The review noted that the two companies' chatbots "provided inaccurate or irrelevant responses up to 50 percent of the time when initially asked 16 complex tax questions."

The release went on to state, "Taxpayers are ultimately responsible for the information reported on their tax returns. Therefore, it is essential to review all information carefully, verify calculations, and seek assistance from qualified professionals."

Unfortunately, care with tax preparation doesn't stop during tax season.

AI has also given rise to year-round tax scams, particularly among adults 65 and older, according to the latest McAfee research. This age group reported just a 15% confidence level (out of 100%) in spotting these scams.

• Scammers use AI to clone the voices of family members or trusted tax professionals to demand payment for "clearing up" account issues.
• AI also allows criminals to generate perfectly worded emails that look and sound like the real deal, including IRS correspondence.
• Scammers can also use "vibe coding" to copy an existing, real website to trick you into uploading your information to what appears to be a legitimate website.

Former U.S. Secretary of Defense Robert McNamara once observed that conflict is often a mirror in his 1995 memoir, referring to the Cold War arms race and proxy wars:

This "security dilemma" now defines our AI-led age. As this technology accelerates our financial capabilities, it simultaneously equips bad actors with more sophisticated tools and security vulnerabilities. The result is a perpetual feedback loop where every defensive innovation triggers a more agile criminal counter-strategy.

Yet, focusing solely on the "AI arms race" risks obscuring the genuine utility of vibe-coded tools.

Beyond the scams and security loopholes, vibe coding is already helping several industries perform essential tasks. Some doctors are using platforms like Google AI Studio to "vibe code" personalized applications for patients, while vibe-coded applications can give students customized, interactive study tools.

In the financial realm, vibe coding can also aid your finance pro in tax planning and retirement strategy — if used safely.

The case for AI (and why it isn't all bad)

AI can be incorrect, insecure, and costly. But once you get past those faults, it can be a useful and unique tool. You just need to know what you're signing up for if your financial advisor uses AI.

A human-led, AI-assisted finance expert can utilize this technology to update their retirement tax plan with data-driven insights, like...

• Analyze vast amounts of financial data that would otherwise be unrealistic for a human to pore over.
• Stress-test different market scenarios, helping you to maximize your portfolio's growth.

But finding a reputable financial advisor is a must. Credible professionals translate the AI "legwork" into a tailored plan that aligns with your specific nest egg and lifestyle goals — they don't just do whatever the AI tells them to.

In today's day and age, more than half of Americans may be getting their financial advice from AI, which, for better or for worse, might say something about our society at large.

Regardless of which side of the aisle you stand on — pro-robot, pro-humanity, or a bit of both — stay vigilant and ask questions.

Your retirement tax portfolio may thank you.

....Maybe even literally. I don't know if they send "thank you" cards yet, but it wouldn't surprise me if they did.

Read More

• Don't let a 'mood' trigger a retirement tax trap.
• Here are the ways AI tax scams targeted middle and older adults last year.
• 'Vibes' aren't tax-exempt, but some states won't tax your retirement income.

The IRS may revise its CP53E notices after months of taxpayer backlash and practitioner complaints.

During a recent meeting with tax practitioners, the IRS Chief of Taxpayer Services said the agency may consider changes to the notices in light of widespread confusion, according to nonprofit publication Tax Notes (paywall).

As Kiplinger has reported, hundreds of thousands of CP53E notices tied to direct deposit verification have reportedly been sent, and by some estimates, several million. In either case, those numbers represent a significant share of taxpayers hearing from the IRS during filing season.

The notices are part of the tax agency's broader effort to shift more refunds to electronic direct deposit and phase out paper checks — a modernization push designed to improve efficiency and lower fraud risk.

But the rollout has become somewhat controversial, as many recipients believed the letters were scams or sent with nefarious intent.

The stakes aren't trivial. Average federal tax refunds for the 2026 filing season hovered just above the mid-$3,000s, and surveys show that most taxpayers planned to use their refunds to cover essentials and pay down debt. So delays can tie up household cash flow.

What IRS notice CP53E means

The CP53E notice is generally issued when the IRS cannot process a refund via direct deposit because:

• Bank account information is missing or incorrect
• Financial institution details were rejected
• Post-filing adjustments result in a refund being issued after changes to a return

Taxpayers are typically instructed to log in to their IRS online account within 30 days to update their banking information. If they don't respond, the IRS says it will issue a paper check. Though that can add roughly 6 weeks to the processing time, depending on timing and agency workload.

Does the IRS use QR codes?

Some tax professionals and taxpayers reported receiving CP53E letters in situations where:

• Refunds had already been received
• No refund was expected
• Taxpayers actually owed money to the IRS

On practitioner forums and social media platforms, some described situations in which CP53E notices reportedly appeared before other notices related to IRS tax return adjustments that would have explained an unexpected refund.

The format of the notices added to the confusion, as some taxpayers reported being unsure about the validity of QR codes and instructions directing them to log in to their IRS online accounts.

Those CP53E scam fears stood out, since IRS impersonation scams have become increasingly common.

Adding to the confusion? The toll-free phone number listed in the notice contains recorded explanations regarding the notice and doesn't connect taxpayers to a live customer service agent at the IRS.

ID.me access concerns

The CP53E notice seems to have also revived criticism of the IRS’s online account system and its reliance on ID.me identity verification.

On social media, some taxpayers said they felt pressured to create online IRS accounts or complete third-party identity verification to resolve refund issues within tight response windows.

One Reddit user described waiting for ID.me verification while the 30-day response deadline ticked down, writing that “having a 3rd party stand between me and my refund feels silly.”

Another practitioner told Kiplinger that she and several of her clients received the CP53E notices, and that some of those clients owed taxes, leading her to believe the IRS might be trying to prompt taxpayers to sign up for IRS online accounts.

The IRS hasn't said the notices were intended to increase adoption of online accounts or ID.me, but updated FAQ materials direct users experiencing access issues toward identity verification support resources.

IRS updates CP53E FAQs due to confusion

Worth noting: the IRS updated its FAQ guidance on CP53E notices.

The agency clarified that the letters are legitimate IRS correspondence and that QR codes included in the notices are intended to direct taxpayers to official IRS online account services, not third-party websites.

The guidance also walks taxpayers through how to confirm a notice’s authenticity by logging directly into IRS.gov rather than using embedded links or scanning codes. The tax agency reiterates that taxpayers will never be asked to provide sensitive information through QR codes or unsolicited text links.

The Taxpayer Advocate Service (TAS) issued separate guidance reinforcing that CP53E notices should be verified on IRS.gov or through official IRS accounts, and that taxpayers who believe they received a notice in error can cross-check their refund status directly using IRS tools before taking action.

TAS also emphasized basic scam-avoidance, including not clicking unfamiliar QR codes or links from unconfirmed notices.

Getting an IRS letter: What happens next

No formal redesign of the notice has been announced yet, so for now, the IRS says the safest approach is to verify your IRS status directly through your official IRS online account.

And remember: Every taxpayer's situation is different, so if you need professional advice on how to respond to a CP53E or other IRS notice, it's a good idea to consult a tax professional.

Overall, the situation highlights a significant challenge for the IRS: modernizing a system that processes hundreds of millions of tax returns and billions of dollars in refunds each year while maintaining trust in its communications with millions of taxpayers.

Related

• Received an IRS Letter? CP53E Notices Spark Confusion and Scam Fears
• IRS Tax Refund Calendar 2026: When Will Your Payment Arrive
• The Government is Phasing Out Paper Checks: What to Know
• Trump No-Audit Deal: Will You Still Get Audited by the IRS?

You may have heard about a settlement between President Donald Trump and the IRS to resolve a $10 billion lawsuit over his tax returns. The deal has sparked backlash, including over a provision that bars the federal tax agency from continuing existing audits involving Trump, his company, and his family members.

The agreement also reportedly creates a multibillion-dollar “Anti-Weaponization Fund” (more on that later).

Meanwhile...the administration has cut IRS staffing and budget — most recently by roughly $1.1 billion in FY26 — since Trump began his second term.

These developments raise several thorny political, legal, and practical concerns. But one key question is whether IRS enforcement priorities will shift in ways that affect more taxpayers: Who else will still get audited, and why?

Trump IRS settlement: How we got here

Before looking at who the IRS might audit, it helps to understand how the Trump IRS settlement came about in the first place.

As Kiplinger has reported, Donald Trump, the Trump Organization, and family members sued the IRS and Treasury Department in federal court in early 2026.

• They alleged that the agencies failed to safeguard Trump’s confidential tax information after an unauthorized disclosure by a former IRS contractor.
• The suit sought $10 billion in damages and drew scrutiny because a sitting president was suing over the very agency that enforces tax law.

By mid-May 2026, Trump said the dispute was resolved through a settlement with the Department of Justice (DOJ). As mentioned, a provision in that settlement appears to limit IRS action surrounding existing audits involving Trump, his family, and affiliated entities.

The settlement also reportedly creates a roughly $1.776 billion “Anti-Weaponization Fund” tied to claims of government misconduct. The fund would be taxpayer-funded and controlled by an administration-appointed group, not the IRS, raising concerns about its broad scope, lack of congressional oversight, and lack of precedent in tax disputes.

A lawsuit has already been filed challenging the fund’s structure, and the combination of a large compensation fund and limits on IRS scrutiny of Trump, his company, and his family is fueling concern.

In a May 21 letter to Treasury Secretary Scott Bessent and IRS CEO Frank Bisignano, several Senate lawmakers wrote the following.

“Through this settlement, you and the President have created a nearly $1.8 billion taxpayer-funded slush fund for the President's political allies, including potentially the January 6th insurrectionists . . . essentially making it official United States government policy that President Trump, his family, and many other allies are above the law.”

Update: A federal judge in Virginia temporarily blocked the Trump administration from creating or distributing money from its "Anti-Weaponization Fund" while the court reviews legal challenges alleging the fund may be unconstitutional and improperly benefit Trump allies.

IRS audit red flags for everyone else?

Even as Trump appears to have reduced exposure to IRS scrutiny for certain existing matters involving him or his family, audits remain unlikely to disappear for other taxpayers.

And one thing to note first: Historically, IRS audit activity has not been evenly distributed, and data show that a meaningful share of audits involving lower-income taxpayers has centered on refundable credits such as the Earned Income Tax Credit (EITC).

The reason seems to be that those are easier for the agency to flag and resolve through automated review and correspondence audit.

What about audit rates? The overall audit tax rate for the IRS is reportedly less than 1%.

• IRS audit rates fell sharply from about 0.9% of returns in 2011 to roughly 0.3% in 2018 (about 9 in 1,000 returns versus 3 in 1,000), according to IRS Data Book figures.
• Audit activity then ticked up modestly through 2024, following new IRS funding under the Biden administration's Inflation Reduction Act.
• Early reporting from President Donald Trump’s second term suggests that audits have softened again due to staffing and budget cuts, which affect enforcement capacity.

With fewer experienced revenue agents available, enforcement leans more heavily on automated systems that can operate at scale — flagging discrepancies between reported income and third-party forms like W-2s and 1099s, or generating notices based on data mismatches.

That tends to push compliance toward high-volume, low-complexity cases where algorithms identify errors. Some so-called “red flags” include:

• Income reporting mismatches detected through IRS computer systems
• Refundable tax credit claims requiring documentation checks
• Self-employment and gig-economy income reporting
• Automated compliance alerts triggered by third-party reporting gaps

More complex audits, like those involving large partnerships, layered business structures, and high-net-worth returns, require more staff time and specialized expertise. As a result, they tend to be more sensitive to staffing levels when the agency loses experienced examiners or shifts resources toward automation.

That doesn't necessarily mean fewer audits overall, but there could be a shift in which kinds of errors the agency catches most often. That tension lies at the center of the broader question raised by Trump’s settlement: not just who is exempt from audit scrutiny, but who remains most exposed and why.

Who get audited by the IRS: Bottom line

For most taxpayers, IRS audits in 2026 are still likely to occur — but probably at relatively low rates overall — and they don’t usually look like the intensive, in-person examinations some people experienced in the past or tend to imagine.

Note: Keep in mind that whether the IRS audits you will depend on your specific tax situation. As Kiplinger has reported, the agency may consider several factors, including income, tax breaks claimed, whether you own a business, etc. Consult a tax professional if you're concerned about your audit exposure.

• More often, modern IRS audits are "correspondence audits."
• These are automated notices often triggered by mismatched income records, missing paperwork, or questions tied to tax credits and deductions.
• They tend to be relatively narrow, system-driven, and generally designed to be resolved through documents rather than agent interviews.

But since enforcement tends to fall most heavily on returns that are easiest to flag automatically, everyday taxpayers can end up more visible than higher-income taxpayers with more complex cases, which many people would assume would or should draw the most scrutiny.

Meanwhile, the Trump IRS settlement is fueling a fiery debate.

Senate Finance Democrats, including the top Democrat on the Senate Finance Committee, Sen. Ron Wyden (D-Ore.), as well as Sen. Patty Murray (D-Wash.), have questioned whether the agreement oversteps congressional authority and effectively restricts IRS enforcement in ways never approved by statute.

At the same time, some Republicans, including Rep. Brian Fitzpatrick of Pennsylvania, have also raised concerns about precedent and process, arguing that any deal involving limits on IRS audits or large compensation structures requires clearer congressional oversight and guardrails.

Fitzpatrick and Rep. Tom Suozzi (D-NY) introduced the No Taxpayer-Funded Settlement Slush Funds Act to prevent federal dollars from being used for the fund.

Notably, Republican Senate Majority Leader John Thune of South Dakota reportedly has said he didn't see a purpose for the fund.

The Justice Department also recently faced questioning in a hearing on Capitol Hill over how the agreement was structured and how a nearly $1.8 billion compensation fund was justified in the context of a tax enforcement dispute. Lawmakers pressed acting Attorney General Todd Blanche for more details on how the terms were negotiated and approved.

Overall? Stay tuned. What becomes of the Trump IRS deal could spark continued debate over tax enforcement and fairness.

More on the IRS

• Common IRS Audit Red Flags to Avoid
• Ask the Editor: Will You Get Audited by the IRS This Year?
• Who Does the IRS Audit the Most?
• Received an IRS Letter? Taxpayer Confusion Grows Over CP53E Notices

After months of scrutiny around the Federal Reserve and its leadership, President Donald Trump’s nominee, Kevin Warsh, is the chair of the Federal Reserve, succeeding Jerome Powell.

Notably, the 54-45 U.S. Senate vote margin to confirm him was reportedly the narrowest in modern Fed Chair history.

As Warsh moved through key Senate confirmation steps, he signaled support for maintaining the Fed’s "strict independence" in interest rate decisions, as lawmakers from both parties pressed him on how he would navigate inflation, borrowing costs, and financial conditions.

Whether a Fed chair is viewed as politically independent matters since confidence in the Fed’s inflation strategy can influence markets, borrowing costs, and expectations for future interest rates.

Powell, for his part, has said he plans to remain on the Federal Reserve’s Board of Governors for a period of time.

All of this wrangling aside, a practical question is emerging for some: What does a change in leadership at the Fed actually mean for taxes?

How higher interest rates impact taxable income

First things first: The Federal Reserve doesn’t set tax rates. Congress does that with implementation help from the U.S. Treasury Department and the IRS. However, the Fed sets interest rates through a vote of its policymaking committee, the Federal Open Market Committee (FOMC), led by the Fed chair.

Still, no Fed chair unilaterally controls interest rates and inflation, labor market conditions, and broader economic trends often carry more weight than any one official’s preferences.

But…the Fed's interest rate decisions can ripple through the economy, affecting household finances, including your taxable income. And that impact is often most visible in savings and cash returns.

• At the moment, with interest rates still elevated, savings accounts, money market funds, and short-term Treasurys are generally paying far more than they did just a few years ago.
• High-yield savings accounts are now commonly near the 4%–5% range, and Treasury bills are offering similar yields.
• For some, that can translate into hundreds or even thousands of dollars a year in interest income, depending on account balances.

The bad news? That income is taxed as ordinary income at the federal level in the year that it's earned. So for retirees, savers, or others holding significant cash outside tax-advantaged accounts, that can translate into a higher tax bill.

As a result, retirees and conservative savers who moved money into CDs, money market funds, or Treasury bills during a rate-hiking cycle might be among the households most likely to notice a difference when filing taxes.

Note: Interest from savings accounts is generally taxable at both the federal and state levels, while interest earned from U.S. Treasury securities is exempt from state and local income taxes.

How different types of income are taxed

It's also important to keep in mind that wages, interest, investment gains, and home sales are all treated differently under the U.S. tax code, and those differences shape when taxes are owed — and how much.

Wages are taxed as ordinary income as they are earned, typically through withholding from paychecks. (As mentioned, interest income and short-term investment gains are also taxed at ordinary income rates.)

• Long-term capital gains on stocks are generally taxed at rates of 0%, 15%, or 20%, depending on income.
• Short-term gains are taxed at ordinary income rates. In many cases, taxes are only triggered when assets are sold.

As a result, two households with similar overall returns can still face very different tax outcomes depending on how those returns are generated.

Inflation and “bracket creep”

And then there's inflation. Over the past few years, relatively high inflation has driven up the cost of living (by more than 20% over the past five years, by some estimates). However, this year, wage growth hasn't kept pace for many workers, even as savings income has risen alongside higher interest rates.

That mix can increase taxable income even when households don’t feel financially ahead.

For example, a raise that only offsets higher costs for rent, groceries, or insurance can still push more income into a higher tax bracket, and higher interest earnings can have a similar effect.

Yes, the IRS adjusts tax brackets annually for inflation, which is designed to help blunt the impact. But when wages, interest income, or investment gains rise simultaneously, larger portions of income can still be taxed at higher marginal rates.

Fed chair news: What a new Fed chair changes and what it doesn’t

Worth noting: Any policy shifts under new Fed leadership would likely unfold gradually and be shaped primarily by inflation and growth trends. So, for many people, any near-term impact is likely to be limited.

The next Federal Reserve policy meeting is happening now, June 16–17, when officials will update their outlook for inflation, growth, and the expected path of rates through 2026.

If rates remain elevated:

• Savings accounts and money market funds continue generating higher taxable interest
• Households with large cash balances see more income reported to the IRS
• Some savers may face higher tax bills or smaller tax refunds

If rates decline:

• Cash yields can gradually ease
• Borrowing costs typically come down
• Financial activity in housing and equities tends to pick up

For some, the tax shift tied to interest rates is already visible…interest income that barely registered a few years ago is noticeable when filing taxes.

Of course, that doesn’t necessarily mean people are better off, but it can change what they owe the IRS when federal tax returns are due.

Bottom line? You don’t necessarily need to follow every single Fed meeting or policy speech. But changes in interest rates — and the people setting them — can still quietly shape what you end up owing at tax time. So stay tuned.

Related

• How High-Yield Savings Account Interest is Taxed
• Capital Gains Tax Rates and Brackets for 2026
• Types of Income the IRS Doesn't Tax

It's a common headline: A billionaire public petitions for higher taxes on the ultra-rich. Yet, you rarely see those same individuals cutting voluntary checks to the U.S. Treasury.

The American tax system isn't built for donations, but rather for taxable income, deductions and incentives. Even if a high-net-worth person sent money to the federal government, that extra cash would simply go toward the nation's $39 trillion national debt — without changing the donor's tax liability.

This disconnect is key, since it helps explain a broader frustration with the IRS tax code.

A recent Pew Research Center study finds that 60% of Americans believe wealthy individuals and corporations don't pay their "fair share" in taxes.

In response, some point out that high earners technically fund a large portion of federal income taxes, but they do so based on income rather than wealth. That difference means more of what makes the ultra-rich wealthy isn't taxed at ordinary rates. This gives wealthier individuals more flexibility to control which assets are taxed and for how much.

Here's how high-net-worth individuals leverage the tax code, who pay the most federal income taxes and what it means for your own income tax bill in 2026.

Why billionaires don't use the 'donation box'

You can't donate to the IRS since your tax bill is a legal obligation, not a charitable choice. You also can't pay another person's income taxes.

However, the U.S. Treasury Department maintains a program called Gifts to Reduce the Public Debt that receives donations to reduce the national debt.

• Since 1996, this program has received roughly $67 million in total donations.
• As of May 2026, the national debt stands at approximately $39 trillion.
• At current federal spending rates (PDF), that 30-year total of donations would fund the U.S. government for about 20 minutes.

As the high-net-worth advocacy group Patriotic Millionaires notes, individual gifts can't replace structural policy.

"A few wealthy people giving our money to the government wouldn't fund a massive investment in our country's infrastructure," the group stated in a release. "Our individual funds simply aren’t enough to make a difference."

Federal income taxes are the bedrock for multibillion-dollar programs such as the Supplemental Nutritional Assistance Program (SNAP), Medicaid and national defense. Since these obligations are generally permanent, they require dependable funds for which the government can budget.

Consistency is key. While the federal government isn't a charity, the importance of consistent revenue is shared with nonprofits.

"Recurring donations are vital to organizational growth and long-term sustainability," NextAfter (PDF), a fundraising research lab, reported in a recent benchmark study. "Not only do they bring consistency ... they also create longer-lasting and more valuable donors."

Who pays the most tax?

According to data from the National Taxpayers Union Foundation (NTUF), the current U.S. tax system is progressive. This means that, as taxable income increases, so does the percentage of federal income tax you pay.

In the most recent reporting cycle (updated April 2026):

What does this table mean? The top 1% earns about 20% of the nation's income, but pay nearly 40% of the taxes. The top 10% earn about 48% of U.S. income but pay about 70.5% of the annual federal income tax bill. Both groups' tax shares exceed their income shares.

It's important to note that the data only covers federal income tax. The table doesn't include payroll taxes (Social Security and Medicare) or state and local taxes, both of which disproportionately affect lower and middle-income earners more than high-income earners, as reported by the Institute on Taxation and Economic Policy (ITEP).

Meanwhile, the U.S. tax gap — the amount of federal taxes owed but not paid — remains a sticking point for your tax dollars. The IRS estimates this gap at roughly $600 billion, with a large share of unreported income coming from the top 1% of earners.

Closing the gap through enforcement on the top 1% alone could theoretically recover $163 billion, per recent Treasury estimates, far more than any donation program could achieve through voluntary checks to the government.

However, the funding levels for IRS enforcement have been a point of significant legislative debate in 2026, impacting how the agency addresses the tax gap and similar initiatives.

How the wealthy employ tax strategies

According to the Pew study, many Americans think some corporations and wealthy people don't pay their "fair share" in taxes. But if the top 10% of earners pay 70.5% of all federal income tax, why the disparity in perception?

Part of the answer lies in the source of income. Most Americans live on "earned income" (W-2 wages, 1099s, etc.), taxed at ordinary federal rates up to 37%, plus subject to payroll taxes such as Social Security and FICA.

But high-net-worth individuals often live on wealth that bypasses these taxes, utilizing a so-called "Buy, Borrow, Die" strategy:

1. Buy. They acquire appreciating assets (stocks, real estate, etc.).
2. Borrow. Instead of selling (which triggers capital gains tax rates), they take low-interest loans against those assets. Loans are not taxable income.
3. Die. Heirs receive the assets at a "stepped-up basis," meaning the capital gains built up over a lifetime are essentially erased for tax purposes.

High-wealth individuals might also make large donations to private foundations to allow for immediate deductions, employ business expense deductions and receive compensation through stock options or distributions (rather than salaries or wages) to further lower their income tax liability.

While these methods are theoretically available to all, unless you have significant capital to begin with, it's difficult to "break in" to the wealth-preservation strategies used by high-net-worth individuals.

Note: These strategies involve significant legal and liquidity risks and are not one-size-fits-all solutions.

The bottom line: Ways to lower your tax bill

Although the average taxpayer might not be able to live off loans against a billion-dollar stock portfolio, you can still move the needle on your own "tax gap" by using the IRS code's intended incentives.

Here are a few ideas for lowering your income taxes (if you're eligible):

• Audit your "voluntary" overpayment. If you're getting a massive refund every year, you're essentially giving the IRS an interest-free loan. Adjusting your tax withholding ensures your money stays in your pocket for investment throughout the year.
• Create your own "tax-free" bucket. You might not have a private foundation, but traditional 401(k)s or individual retirement accounts (IRAs) allow you to shield income from the IRS today. By using pre-tax dollars, you're effectively lowering your taxable income and withdrawing those funds at perhaps a lower rate during retirement.
• Prune your portfolio. Use tax-loss harvesting to offset capital gains with losses (just be mindful of the "wash-sale" rule, which disallows the loss if you buy the same or a "substantially identical" asset within 30 days). Keep an eye on the calendar: Assets held for more than one year qualify for long-term capital gains rates, which, at 0%, 15%, or 20%, are significantly lower than the ordinary income rates applied to short-term gains.

If you're feeling generous …

Starting this year, new charitable deduction rules take effect. Up to $1,000 ($2,000 for married filing jointly couples) in qualified cash donations can be deductible on your federal return, even if you claim the standard deduction.

But whether you send that check to the Treasury to fund a millisecond of federal overhead — or provide thousands of meals at a qualified food bank — the choice is yours. We can't all be billionaires.

This article is for informational purposes only and does not constitute professional tax or financial advice. Tax laws are subject to change and vary by individual circumstances. Consult with a qualified tax professional regarding your specific situation.

Read More

• Residents Driven Out of High-Tax States in 2026: But Will You Still Owe Taxes After Moving?
• Taxpayer Confusion Grows Over Whether IRS Notices Are Real
• First the Penny, Now the Nickel? The New Math Behind Your Sales Tax and Total
• 10 Frugal Habits People Are Using to Save in 2026 With 'Broke Planning'

As part of a broader push to modernize payments, the IRS has been phasing out paper refund checks. This tax season, that shift has triggered a surge in notices asking taxpayers to confirm or update their banking information.

These letters, known as CP53E notices, are landing in more than 1 million mailboxes, according to some congressional estimates.

Unfortunately, as you might expect, the spike in IRS correspondence could increase the chances of receiving a letter in error, per some social media reports, or create confusion over whether the notices are from fraudsters.

So, how do you know if your IRS refund letter is real? And what should you do if you get one? Here's more to know and some red flags to watch.

Related: IRS May Change Controversial CP53E Letters

Why CP53E IRS letters seem to be everywhere

Let's start with why what's happening is happening.

A CP53E notice from the IRS typically means the tax agency couldn’t deposit your tax refund as requested. That's often due to missing or mismatched bank account details.

But this year, volume is part of the story.

As Kiplinger has reported, the federal government, including the IRS, is phasing out paper checks and steering more payments toward direct deposit. As a result, hundreds of thousands of taxpayers are being prompted to review or fix their banking information.

So, in recent months, there has been a significant surge in the number of legitimate CP53E letters issued by the IRS.

• Congressional data indicate that 1.4 million CP53E notices have been issued as of March 2026, amid the direct deposit push.
• As mentioned, this volume stems from IRS efforts to reduce paper checks, which take longer to process (typically 6-8 weeks, compared with a few days for electronic payments).
• The Taxpayer Advocate Service reports that direct deposit issues affect roughly 5% of filers each year, but the shift to paper checks has affected the number of notices sent this year.

That increase comes amid reports that some people have received notices sent in error or have received the CP53E notice even though they owed the IRS taxes this year.

The whole situation is raising concerns among taxpayers. Some question the tax agency's motives for sending letters to those who shouldn't receive them, while others are unsure about the authenticity of communications they receive purporting to be from the IRS.

What is an IRS CP53E notice?

As mentioned, the IRS typically sends a CP53E notice when the agency can't deposit your tax refund due to missing, outdated, or mismatched bank details on file.

If your letter is legitimate, it usually indicates a processing issue with your refund — not a penalty or IRS audit.

In most cases:

• Your refund is temporarily on hold (usually approximately 21 days until you provide corrected information via your official IRS account).
• The IRS needs corrected or confirmed deposit details.
• You’ll have time to respond.

If you don't take action, the IRS may still eventually send a paper check. It just may take some time, likely about 6 weeks, according to the agency.

How to spot a fake IRS letter: Red flags to consider

Here are some things to look at closely if you receive a letter that you're not sure is real.

Be wary if the letter you receive asks for sensitive personal or banking information.

This might include your full Social Security number, bank login credentials, or detailed account information, or direct you to click a third-party link or scan an unfamiliar QR code. (Avoid scanning those codes in an unverified letter.)

You'll also want to be cautious if the letter's tone is urgent or threatening.

While legitimate IRS letters can be daunting, they usually should not rely on overly panic-driven language. And in the case of refund direct deposit notices, since you typically have roughly 30 days to respond, you will still likely receive a paper refund check if you don't. So, panic language could be a red flag.

Keep in mind: The IRS generally doesn't ask for sensitive data in unsolicited correspondence. Instead, a legitimate notice will typically direct you to log into your official IRS account via the official IRS website, not through a third-party or otherwise unfamiliar link.

Another thing to consider is whether the letter's details match your tax situation.

Some taxpayers have reported receiving notices about refunds they weren’t expecting or about returns for which they are not due a refund.

That kind of mismatch doesn’t always mean fraud is involved, but it’s a signal to pause and verify before acting.

How to verify your CP53E notice and respond

If you receive a CP53E notice, the safest course is to go directly to the IRS website by entering the official IRS URL in your browser. From there:

• Log in to your official IRS online account
• Check whether the notice appears
• You can also call the IRS using an official number

IRS refund status: Bottom line

According to IRS reporting, refunds run about 11% higher on average than last year. The average refund amount has hovered around $3,400, most likely due to changes in the Trump/GOP tax and spending bill enacted last year.

Recent polls suggest that many plan to use that money to pay down debt or cover essentials.

Overall? If a letter that looks like it's from the IRS asks you to share sensitive information, click on unfamiliar or third-party links, or act immediately, take a step back and verify it first.

And if your notice is legitimate and you need to track your tax refund after completing the direct deposit process, the IRS says to allow 2-5 days for your refund information to update online. From there, you can use the Where’s My Refund tool to check your refund status.

This article has been updated to mention taxpayers receiving letters even when they owe the IRS.

More on Tax Refunds

• IRS Refund Schedule 2026: When Will Your Money Arrive?
• 5 States Where Tax Refunds Could Be Later Than Usual
• Why Your IRS Refund Could Be Delayed or Frozen

Is your income safe from taxation this year? As we approach the midway point of 2026, you might be thinking about next year's income tax bill already.

The 2025 Trump tax bill has made headlines by making certain tip income and overtime pay "tax-free" via new deductions.

At the same time, other income — like credit card referral bonuses, small gambling winnings, or even certain life insurance payouts — could still trigger a bill. Even a simple gift might have hidden strings attached.

So how do you know what's considered federally taxable in 2026? Take our scenario-based quiz to see if you're ahead of the curve or headed for a surprise.

Note: This quiz covers federal income tax policy only. State laws may vary.

Explore More

• Taxable Income: What It Is and How to Calculate It
• Types of Income the IRS Doesn't Tax
• Capital Gains Tax Rates: What You Need to Know
• How to Calculate Taxes on Social Security Benefits

As Americans rush to meet the tax deadline this year, frustration about paying too much remains high, and in some ways, seems to be intensifying.

A March Fox News poll found that about 7 in 10 registered voters say their taxes are “too high,” up from roughly 6 in 10 last year. At the same time, a Pew Research Center survey found that about 60% of U.S. taxpayers are bothered "a lot" by the belief that wealthy people and corporations don’t pay their fair share.

Those numbers come as Tax Day 2026 wraps up and follow a sweeping tax overhaul last year when the 2025 tax law, pushed by President Donald Trump and congressional Republicans, was enacted.

Trump tax law 2025 changes and costs

Signed on July 4, 2025, the massive tax legislation known by some as the "big beautiful bill" extended Trump's prior 2017 tax cuts and added targeted breaks aimed at workers and retirees.

Among the most talked-about provisions:

• A deduction for tip income, capped at $25,000
• A deduction for overtime pay, capped at $12,500
• A new $6,000 “senior bonus” deduction
• A modest increase in the child tax credit to about $2,200
• A higher cap on state and local tax (SALT) deductions

But those tax cuts came with significant offsets — and long-term costs.

For example, the new law includes roughly $1 trillion in Medicaid cuts over the next decade and about $187 billion in SNAP (food assistance) reductions through 2034, according to policy estimates.

Analysts project the package will add significantly to the national debt over time, as lower tax revenues outweigh spending cuts.

Tax refund status vs. political promises

One way many Americans experience tax policy is through their IRS tax refunds, and here, the gap between messaging and reality is notable this year.

As Kiplinger reported, Republican lawmakers predicted and touted that the 2025 tax law could boost refunds by as much as $1,000. In reality, early data show that while average refunds are up by about (11%) that only amounts to an increase of roughly $300 to $350 from last year for many taxpayers.

And worth noting: most households are not treating that money as extra spending power.

Surveys show a majority of Americans say they plan to use their refunds to cover essentials like rent, groceries, utilities, and debt payments, rather than discretionary spending or savings.

Inflation rate right now

Another reason tax relief is being overshadowed: prices are rising again.

Recent inflation data shows monthly price increases accelerating again in early 2026 to 3.3% from 2.4%, with energy costs playing a leading role.

Gas prices have jumped sharply amid the Iran War conflict and resulting instability in the Middle East.

According to AAA, national gas averages are now roughly in the mid-$4 range per gallon. That's compared to significantly lower levels before the recent escalation in oil markets.

At the same time, even though the U.S. Supreme Court recently struck down many of Trump's tariffs, some economists note that tariffs imposed or expanded under the Trump administration have added upward pressure to imported goods — from electronics to clothing.

Which new tax breaks people actually like

Not all parts of the 2025 law are viewed equally. Some of the most popular provisions seem to be the most direct:

• Tax breaks on tip income
• Tax breaks on overtime pay

The $6,000 senior deduction has also seemed to draw support among retirees, though its impact varies depending on income level.

By contrast, more complex provisions — like the deduction for car loan interest — have reportedly not been claimed as much thus far on 2025 returns.

Another issue: Corporations not paying their 'fair share'

Beyond individual tax bills, data show that tax fairness remains a concern.

That perception is reinforced by corporate tax data. A 2026 report from the Institute on Taxation and Economic Policy (ITEP) found that at least 88 large, profitable U.S. corporations paid zero federal income tax in 2025. That's despite earning more than $105 billion in combined profits.

• The list includes major firms across sectors, like Tesla, 3M, Honeywell, Yum! Brands, and PayPal, along with several large airlines and consumer companies.
• The ITEP report highlights how widespread the use of deductions, credits, and loss offsets has become in reducing corporate tax liability.

Supporters of lower corporate tax rates say they incentivize investment and economic growth.

Critics argue the benefits are uneven, noting that large corporations often leverage complex tax structures, loopholes, and offshore strategies to minimize their tax burden — often paying effective tax rates well below those faced by individuals.

Tax Day 2026: Bottom line

Tax Day frustration isn’t just about how much people pay the IRS if they owe — it’s about whether tax relief is tangible and whether the system feels fair.

The 2025 tax law has arguably delivered:

• Modestly higher refunds so far
• Some popular deductions for tips, overtime, and older adults
• Expanded tax benefits for businesses and investors

But it also comes with:

• Large projected cuts to Medicaid and SNAP
• Rising deficits and debt pressure
• Inflation driven by energy markets and tariffs
• Persistent concerns about corporate tax avoidance

So, recent tax cuts may have moved some of the numbers for some, but they don't seem to have shifted public sentiment in a positive direction.

As long as tax relief feels uneven for many and the cost of living remains high, most Americans will continue to feel unfairly overtaxed.

Related

• Tax Refund Schedule 2026: When Your Money Will Arrive
• What's in the 2025 Trump Tax Bill?
• Why Your IRS Tax Refund Could Be Frozen or Delayed This Year
• How to Pay the IRS if You Owe

Tax Day is finally here, and unless you’ve filed for free, tax prep can take quite a bite out of your wallet.

To celebrate the end of tax season, which falls on Wednesday, April 15, this year, many restaurants nationwide will offer deals, discounts, and freebies to sweeten your civic duties as a taxpayer.

Whether you are waiting until the last minute to file your taxes, need to file an extension, or have already filed your taxes and are waiting on a refund, don’t miss out on these limited promotions to toast off Tax Day.

Here’s where you can score deals on Wednesday (or even after the 15th in some cases) and make your tax obligations a bit more appetizing.

Burgers and Sandwiches

Shake Shack free burger

From now through April 27, 2026, customers can enjoy a free single Black Truffle Burger, Black Truffle Shroom, or Black Truffle Parmesan Fries with a $10.40 or more order.

To score this deal, enter promo code TRUFFLETAX at checkout

Potbelly bogo tax day

Need to take the edge off of Tax Day? On April 15, if you purchase one Big or Original sandwich at Potbelly, you can get an Original free sandwich with the promo code BOGO.

You can claim your Potbelly deal in-store, online, or by ordering via the app or website.

Burger King

Since Tax Day falls on a Wednesday this year, BK is highlighting "Whopper Wednesday."

Royal Perks members can grab a Whopper for $3.99. Also, check the app for a BOGO Original Chicken Sandwich deal.

Subway "Tax Day Refund"

Subway is turning the dreaded 1040 tax form into something much more appetizing this year with a "Tax Day Refund" for its loyalty members. Through April 28, Sub Club members can use the promo code FLBOGO on Subway.com or the Subway app to buy one footlong and get another for free.

However, the real "refund" happens on Wednesday, April 15, when 1,040 randomly selected members who use that code will receive an extra surprise footlong coupon deposited directly into their account.

"Tax Day can be tough, especially for folks who are getting a bill this year instead of a break when they need it most," Dave Skena, Subway’s Chief Marketing Officer said in a release. "Whether you are using our Buy One Get One Free footlong offer or are one of the 1,040 footlong 'refund' recipients, we hope a freshly made, handcrafted and delicious sandwich from Subway provides some relief."

Sweet Treats

Krispy Kreme tax day special

Need a sweet treat on Tax Day? On Wednesday, April 15, 2026, purchase a dozen Krispy Kreme doughnuts at regular price and receive a second dozen Original Glazed for just the cost of sales tax in your state.

"Finishing your taxes is a big accomplishment, and we think that deserves a reward,” Alison Holder, Krispy Kreme’s Chief Brand and Product Officer, stated in a release. “Our Tax Day offer is a simple, joyful way to celebrate crossing that last thing off your to-do list – and enjoying something sweet once it's finally done.”

For online orders, use code TAXBREAK.

Paris Baguette tax day deal

Are you a rewards member at Paris Baguette? If so, you can get a free pastry with the purchase of any beverage on April 15.

That should make Tax Day a little sweeter this year.

Cool off with a drink

Kona Ice tax day

If you want to save your hard-earned money, make sure to stop by Kona Ice on April 15 and celebrate their “National Chill Out Day.”

You can get free shaved ice on Tax Day, just visit your nearest Kona Ice location.

Smoothie King

Meanwhile, if you want to cool off, Smoothie King is offering Healthy Rewards members $3 off on purchases worth $15.

You can also get $4 off if you spend $20 or more.

STK

Some folks may want to top off Tax Day with a drink. At STK, you can enjoy a signature cocktail all day for just $10.40.

The deal is only available at the bar and on the patio at select locations and excludes Boston, Salt Lake City, and Toronto.

Italian and Mexican Food and Pizza

Olive Garden free entree

At Olive Garden, starting at the price point of $14.99, you can order from a select menu of entrees and choose a salad or soup of your choice. The deal also comes with unlimited breadsticks.

The promotion is available until May 4 and comes with a free entree for you to take home, which can be spaghetti with meat sauce, fettuccine alfredo, or five-cheese ziti al forno.

Grimaldi’s tax day promo

Customers at Grimaldi's pizzeria chain can receive $10.40 off any order of $40 or higher with the promotion code TAXDAY26 on Wednesday, April 15.

This offer is valid for dine-in, to-go, and online orders, but it cannot be used at locations in Brooklyn (DUMBO) or the Las Vegas Palazzo.

Unlike last year, Tax Day falls on a Wednesday. So, while Grimaldi's famous half-off glasses and bottles of wine deal (Tuesday Tastings) happens the day before, on April 14, military members and veterans can still enjoy their 15% discount every day of the year, including Tax Day, with a valid ID.

Fazoli’s

At Fazoli’s, customers can get a buy-one-get-one-free deal if they order their classic Baked Spaghetti on April 15. Just use the code TAX26, available at select locations.

QDOBA tax day 'Guac Relief'

QDOBA is leaning into its "free guacamole" policy this year with a Tax Day Guac Relief campaign.

To claim your relief, sign up for QDOBA Rewards and head to www.TaxDayGuacRelief.com to complete a quick survey about a time you were overcharged for guac at another restaurant.

• If you "file" your survey by the 11:59 p.m. ET deadline on Wednesday, April 15, you will unlock a $5 Reward toward any full-sized entrée.
• The credit will be automatically deposited into your Rewards wallet on Monday, April 20, and will be available for redemption through Sunday, April 26.

"At QDOBA, we want guests to enjoy their meal without paying unnecessary charges for guac. That's why we're proud to offer free guac made with fresh Avocados From Mexico® on our create your own entrees. This tax season, we're offering our Rewards Members real Guac Relief they can taste," Jon Burke, Chief Marketing Officer at QDOBA stated in a release.

More savings

White Castle

At White Castle, you can get 15% off your order with the coupon code WC15OFF on April 15.

Hooters

On April 15, participating Hooters locations will be offering select appetizers for $4.15.

These are dine-in specials available at participating locations to help customers celebrate the end of tax season.

BJ’s Restaurant & Brewhouse

Need a break after crunching those numbers? BJ’s Restaurant & Brewhouse is offering a discount for diners on Wednesday, April 15.

Customers can take $10 off any purchase of $40 or more when they dine in or order takeout.

If you’re ordering through the BJ’s app or website, simply use the promo code TAXDAY at checkout to claim your savings.

TurboTax Uber discount

TurboTax is offering a $25 Uber ride credit to, or from, a local TurboTax in-person office for tax filing. The offer, available only in select cities, is valid through April 15, 2026.

To take advantage of the deal, you must book an appointment with a local tax expert via the Uber app or the TurboTax booking page.

Free Tax Filing

Tax Day deals: You can still file your taxes for free

The national deadline to file taxes is here, but don’t fret.

The IRS expects more than 140 million taxpayers to file their taxes by the April 15 deadline; however, you can still request an extension to pay or file if you need extra time. Keep in mind that some states and counties may have an extension to file due to recent natural disasters.

While these sweet deals can make your Tax Day a little better, don’t overlook tax credits and deductions on your return if you are eligible for them.

From family tax breaks for dependents and children to new deductions on car loan interest and overtime pay — follow our coverage to make your 2026 tax season easier.

Finally, you can still save on your tax prep and filing.

• The IRS Free File tool is eligible for taxpayers with an adjusted gross income (AGI) of $89,000 or less for 2025.
• IRS Direct File is no longer available.
• More free filing options are available through partnerships with the IRS.

More About Tax Day

• Tax Tips for Last-Minute Filers
• New USPS Postmark Rules to Know for Tax Day
• Nine Tax Deadlines for April 15
• 8 Big IRS Tax Changes to Know Before You File

As the April 15 tax deadline approaches, it’s common to take a second look at your return and spot a few things you wish you’d done differently.

But before you panic, it’s important to know that while some errors are easily fixed, others are much harder to change once your return is in the hands of the IRS.

The key is knowing which mistakes are worth correcting. In some cases, rushing to change a minor detail can stretch your processing time out for months, only to lead to the same outcome. Here's more to know.

What you can change on your taxes after you've filed them

Some updates can be made after your return is submitted. However, in many cases, the IRS requires filing an amended return using Form 1040-X.

Common triggers for needing to amend include:

• Reporting Missed Income: This is common if a 1099 or W-2 arrived late or was updated after you hit submit.
• Life Events: Significant changes, like a marriage, birth, or adoption, or the death of a loved one, can fundamentally shift your filing status and eligibility.
• The Qualifying Relative: Realizing after filing that you provided more than half the support for an aging parent could unlock the $500 Credit for Other Dependents.
• Maximizing Credits: A minor oversight on a child's residency or age could mean missing out on the $2,200 Child Tax Credit. Or if you filed before your school sent the final 1098-T form, you might have missed the American Opportunity Tax Credit (AOTC), which can shave up to $2,500 off your tax bill.

Example: When to amend your return

The Situation: You filed in February, but in March, you realize you forgot to claim the new deduction for your car loan interest or your qualified overtime pay.

The Result: Because these new 2025 deductions could directly lower your taxable income, filing a 1040-X is likely worth the wait. It could increase your refund by hundreds of dollars.

Note: This is a simplified example. Whether you should amend your return will depend on your specific tax situation.

Overall, if a change affects what you owe the IRS or how much money you get back, it’s typically worth correcting. However, if you're uncertain, consulting a tax professional can help you decide if the math justifies the extra paperwork.

What’s harder to change after you submit your return

Some decisions are effectively locked in once your return is filed, especially after the Tax Day deadline passes.

Certain tax elections and filing choices are only available up to the original filing deadline. However, once that window closes, your ability to change direction is limited, even if new information comes to light.

Some examples:

• The Joint to Separate Rule: If you and your spouse filed a joint return, you generally cannot change your mind and switch to "Married Filing Separately" once the April 15 deadline has passed.
• Irrevocable Elections: Certain technical choices, like electing to forgo a "net operating loss carryback" or specific business accounting methods, are often permanent once submitted on an original return.
• The 65-Day Rule for Trusts: If you are a trustee, the window to "push" 2025 income out to beneficiaries to lower the trust's tax bill (known as the 65-day election) closes in early March. If you missed that window, you can't "amend" your way back into it later.

When to fix a tax mistake — and when to leave it alone

Notably, not every mistake requires you to file an amended return. Often, the IRS catches and corrects simple math errors for you.

As Kiplinger has reported, under the recently enacted IRS MATH Act, the agency is now required to be much more transparent about these "automatic" fixes.

If the IRS adjusts your return, they must send you a detailed notice explaining exactly which line they changed and why, giving you a clear 60-day window to disagree with their assessment.

Example: When to leave it alone

The Situation: You realize you accidentally typed "$5,200" instead of "$2,500" for a single line of income, but your tax software already caught the discrepancy in your final total.

The Result: If it's a "transposition error" that doesn't change your final tax owed, the IRS will likely reconcile it during processing. Filing an amendment for a $0 change only puts your return at the back of a 20-week line for no reason.

For more information, see Kiplinger's report: Made a Tax Return Mistake? A New IRS Law Could Help You Fight Back.

Overall? If the mistake doesn't change your tax liability or your refund, filing an amendment may not be worth the potential processing delay.

But keep in mind, the above is a simplified example. Your specific tax situation will determine whether an amended return makes sense.

What happens when you file an amended return

Amended returns take longer to process than standard filings.

While some electronic amendments move faster, the IRS officially presents a timeline of 16 to 20 weeks for full processing.

In some cases, tax pros recommend waiting until your originally filed return has been processed and you’ve received your initial refund (if any) before filing an amended return.

What can trigger the IRS to flag your return for review?

If your reported income doesn’t match what’s on file with the IRS (from employers or banks), the system may flag your return. This "mismatch" is a key cause of delays and often occurs with freelance work or investment accounts.

When a return is flagged for inconsistency or identity verification, it moves to a manual review queue.

Taking a few extra minutes to ensure your 1099s match your filing can prevent your refund from being stuck in a months-long backlog.

Changing your tax return after filing: Bottom line

Filing your taxes is a major step, but it’s not always the final one for everyone.

By understanding what the IRS fixes automatically and what requires a 1040-X, you can avoid unnecessary IRS processing delays and make more confident decisions about your money.

Read More

Don’t Make These 5 Common Mistakes on Your Tax Return

8 Big Tax Changes to Know Before You File

IRS Tax Refund Schedule 2026: When Will Your Refund Arrive?

7 Bad Tax Habits to Kick Right Now

Are you one of those taxpayers who rushes to the post office or collection box on Tax Day, April 15, to mail your tax return, confident the IRS will accept your offering as filed on time? If you are, this year you could be in for a rude shock.

A new modernization program, known as USPS’s "Delivering for America" (DFA) initiative, has changed how postmarks work.

Before December 2025, the United States Postal Service (USPS) postmarked your envelope the day it was dropped into a mailbox or collected. The IRS was bound to recognize your tax return as timely filed, even if it arrived at the tax agency days later.

Now, mail is postmarked only after delivery to a processing facility. But the pickups aren’t constant. So uncollected envelopes have to wait until the following day to be taken to the processing facility, which could delay the postmark date by 24 hours or longer.

The result? The IRS could levy automatic penalties for late filing, late payment, and interest, for a return you delivered to the USPS on April 15 but was not postmarked until after that date.

Fortunately, if you typically mail your tax return, there are ways to circumvent the postal speed bumps. Here's what you need to know before Tax Day.

USPS postmark rule change: How late can I file my taxes?

The new USPS rule is a major shift in how the postmark date is legally defined and communicated to the public.

With the rule change, the postmark explicitly reflects the date an automated sorting machine first processes the mail at a regional processing facility. It is not the date when the mail is handed to a carrier, dropped off at a retail postal facility, or placed in a collection box, as would be the case before the change.

However, the new rule does NOT change the fact that your tax return must be postmarked by April 15 to be recognized as timely filed by the IRS.

Missing the IRS April 15 tax deadline: Late filing and late payment penalties

If you don't file by the April 15 deadline, the IRS may impose two penalties: one for late filing and the other for late payment. They can be imposed simultaneously.

Late tax filing penalty. If you don’t submit your return by the deadline (or by the extended deadline if you requested one), the IRS imposes:

• A 5% failure-to-file penalty on the unpaid tax for each month or part of a month the return is late.
• The rate is capped, maxing out when the penalty equals 25% of your unpaid taxes.
• If you file more than 60 days late, the minimum penalty for 2026 is the lesser of $525 or 100% of the tax you owe.

Late tax payment penalty. If you fail to pay the tax due by the deadline, the IRS imposes:

• A 5% failure-to-pay penalty on the unpaid tax for each month or part of a month it remains unpaid.
• This penalty is also subject to a cap, maxing out at 25%.

Then, on top of penalties, the IRS charges interest at a 6% annual rate for the second quarter of 2026, compounded daily. Unlike penalties, there is no cap on interest.

How to beat the April 15 deadline with the USPS rule change

The IRS follows the “first official mark” rule, which means the earliest legible postmark affixed by a USPS-controlled source.

So, if you can’t mail your tax return early enough to avoid the possibility of it being postmarked after April 15, here are three different avenues you can take to navigate the new USPS postmark rule:

1. At the postal facility. Go to the counter and ask the clerk to "round-date stamp" or "hand cancel" your item (this assumes you’ve already affixed the proper postage). This is the circular, manual stamp most of us are familiar with. To avoid legibility issues cropping up during processing, ask the clerk to place the stamp in a clean area of the envelope.
2. At the retail counter. Get a postage validation imprint (PVI). After you pay for postage, the clerk prints a white rectangular sticker (the PVI) and affixes it to your envelope. Like the hand stamp, the IRS accepts the date on a PVI label as the official postmark and proof of when USPS took possession of your return.
3. Send your return via certified mail. This is sometimes called "the gold standard." With certified mail, you get a receipt with the date stamped on it. If the IRS claims they never received the return or that it was late, this piece of paper is physical proof that a USPS employee held your tax return in their hands on April 15.

If you must file a paper return, the best thing is to get it done and drop your tax filing in the mail as soon as possible. But things happen, and suddenly we’re scrambling at the last minute. Hopefully, these tips on mailing your tax returns on time will give you a little peace of mind.

Read More

• Should You File a Tax Extension? 5 Pros and Cons to Weigh Before April 15
• Tax Tips for Last-Minute Filers
• Mailing Your Tax Return This Year? What to Know Before You Do

Every year on April 15, millions of Americans engage in a high-stakes race against the tax clock.

But have you ever wondered why we don't file returns on January 1? Or when we started paying federal income tax to begin with?

The history of Tax Day is a strange timeline of moving days, postmark rules, and a specific holiday in Washington, D.C. that still catches taxpayers off guard. So before you file your return, take our trivia challenge to see how much you actually know about this important date in tax season 2026.

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The 2026 FIFA World Cup kicks off this month with a projected record $150 billion in total wagers — driven largely by millions of first-time bettors.

But while new fans may be studying brackets, a different kind of scoreboard lurks off the field: shifts in federal tax law. Under the newly enacted 90% limit on gambling loss deductions, even fans who finish the tournament break-even could face an unexpected bill from the IRS.

Here is how the new "phantom income" tax works, how a surge of casual players will shift the betting lines, and what you need to track to protect your bankroll.

How first-time bettors shift World Cup odds

Favorable match times for the North American audience, a new 48-team format (up from 32), and unprecedented expansion of legal mobile betting platforms have led to a surge in casual U.S. World Cup bettors for 2026.

According to a survey commissioned by the global payment platform Paysafe, 29% of U.S. bettors are gambling for the first time, and about 60% of global fans plan to wager on the World Cup (where betting is legal).

The influx of new bettors is expected to shift World Cup odds as casual fans usually bet on popular, well-known teams. To protect themselves from losing too much money on favored team wins, sportsbooks will employ various methods, like making these favorite bets less rewarding.

So if you are placing your first wagers, keep your eye on three distinct market trends driven by fellow casual fans:

• Overpriced favorites. New bettors love to wager on household names like France and Spain, which can shorten the odds. This means you have to risk more to win less. Evaluate whether those odds offer actual value compared to the team's true probability of winning.
• The "over" bias. Casual fans tend to bet on high-scoring games because rooting for goals is more fun than rooting for a defensive match. This bias artificially drives up the line for the total number of goals expected, making "under" bets a potential value area. Look for defensive matchups or games with poor weather conditions where total points or goals have been driven up.
• Platform slowdowns. High volumes of bettors could lead to slowdowns in online sports betting performances, including app downtime. If you're placing a time-sensitive bet, try using cellular data, force-closing background apps, or switching to a desktop browser for optimal operational efficiency.

Data was aggregated from online sportsbooks like DraftKings and FanDuel as of June 2026. Check the websites for the most up-to-date information.

New tax rules: The 'phantom income' trap

In addition to more bettors than ever, the next biggest danger for a casual 2026 World Cup bet might just be the newly updated IRS rule governing gambling losses.

That's because historical bets allowed you to deduct your losses against your winnings to owe $0 in federal taxes (assuming you itemized).

In the 2026 tax year, however, federal law caps gambling loss deductions at just 90% of your total winnings, creating what tax experts call taxable "phantom income."

How does it work? Let's say you have a rollercoaster World Cup: you win $3,000 on the group stages but lose $4,000 on the finals.

• Winnings: $3,000
• Deductible losses: $2,700 (90% of your $3,000 win)
• Taxable income: $300

Even though you're down $1,000 in cash, the IRS sees $300 in income. This amount is taxed at ordinary rates (10% to 37%), meaning you're paying the government for the privilege of losing money.

Here's the real kicker: If you take the standard deduction — like roughly 90% of Americans do — you can't deduct any losses. You would be legally required to report and pay taxes on the full $3,000 in winnings, and swallow the $4,000 loss out of pocket.

Reporting rules and the $2,000 threshold

It's also a common misconception among first-time bettors that if you don't receive an official tax form from a sportsbook, you don't owe taxes.

That's not true. Although the IRS recently raised the automatic reporting threshold for sportsbooks from $600 to $2,000 (provided the winnings are at least 300 times the wager), federal law still requires you to self-report every dollar of gambling income, regardless of the amount.

So help protect yourself from a tax audit red flag this season by:

1. Tracking every wager. Maintain a clear, chronological log of every single slip, date, stake, and payout.
2. Separating your sessions. The IRS calculates wins and losses by individual betting "sessions," not your total net account balance at the end of the summer.
3. Keeping digital receipts. Do not rely on your sports betting app to keep your records forever; download your detailed betting history statements monthly.

Also, keep in mind state tax rules. Even though the federal threshold is $2,000, states like Connecticut or Ohio often trigger reporting at just $600. At the same time, if you're betting in "income tax-free" states like Tennessee, you'll likely dodge the state gambling taxes (though rules governing what counts as "legal sports betting" may apply).

And in some states, like California and Alabama, online gambling is illegal. So check your local rules before placing a bet.

Do I have to pay tax on away bets?

If you place an "away bet" — whether in a different state or abroad — you're generally subject to the gambling and tax laws of the location where your wager is physically processed. This can look different depending on where you are, for example:

• Traveling state-to-state: New Jersey (host of the World Cup Final at MetLife Stadium) is highly sports-bet-friendly, but it taxes all forms of mobile and in-person betting. Meanwhile, Washington state does not tax gambling winnings at all, but state law completely bans mobile sports betting, meaning you can only wager in person at Tribal casinos.
• Crossing the border: If you are traveling to catch matches in Mexico or Canada, your U.S. mobile betting apps' "confirm bet" button probably won't work. State regulations require sportsbooks to use strict geolocation tracking, meaning your account will not allow a new bet the moment you cross the border. To wager internationally, you must follow that country's local rules and still report any winnings to the IRS.

The bottom line

Enjoying the 2026 World Cup tournament doesn't have to mean compromising your finances. By maintaining a clean log of your wagers and treating every betting slip as a financial document, you can safely navigate the IRS's new 2026 playbook and ensure an unexpected tax bill doesn't ruin your season.

So stay safe, have fun, and keep the drama on the field, not on your Form 1040.

The information provided in this article is for educational and informational purposes only and does not constitute legal, financial, or tax advice. Wagering decisions are made at the sole discretion of the reader. Consult a qualified tax advisor or certified professional before making financial commitments.

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If you're a ride-share driver, delivery person or other gig worker, a simple smartwatch habit could land you in hot water during a tax audit. That's because fitness app users who track business miles might not be aware of the in-app limitations.

For instance, many free versions of distance-tracking apps cap the number of trips you can take, forcing you to record them later. But if you aren't logging your miles correctly at the time of the trip, the IRS can disallow your entire deduction under the contemporaneous record rule.

At the 2026 IRS business mileage rate of 72.5 cents per mile, those trips through Uber, DoorDash, real estate clients, and supply stores can quickly add up to a significant tax deduction.

By incorrectly recording miles, you could be leaving some serious cash on the table — or worse, raising an IRS audit red flag if you include inaccurate trips on your return.

Don't wait until tax season to discover your smartwatch logs are insufficient. Before you file your 2026 return, ensure your tracking meets these non-negotiable IRS standards.

IRS mileage rate and log requirements for 2026

The 2026 IRS mileage rate of 72.5 cents per mile has strict requirements for what constitutes a valid business mileage log. You must meet four specific data points for every single trip to be eligible for a deduction:

1. The date of the trip
2. The destination (address or city)
3. The business purpose (e.g., picking up an order for a delivery)
4. The total mileage logged

Additionally, to help support your claim to an IRS mileage deduction, you must follow these specific requirements:

• "Contemporaneous" logs. You must create your record at or near the time of your trip. ("Estimating" a log from memory or bank statements later is a major red flag for the IRS.)
• No commuting. Remember that driving from your home to your primary workplace (and back) is considered a personal expense and is not deductible. (For this reason, a Reddit user drives to a "central place in town" before starting their route.)
• Odometer readings. You should record your vehicle's odometer reading on January 1 and December 31 each year to establish the total distance driven for the year.

GPS 'dead zones', data gaps and bad reports — oh my!

Though many mileage apps offer "one-tap" tracking from a smartwatch, users should exercise caution when using them (pun intended). Not all convenient features meet the IRS's rigorous standards for a business expense deduction. For instance, GPS-based apps can:

• Lack specific "why" details. If you fail to categorize a trip in the app with a specific business purpose (e.g., dropped off a customer at 123 Main St.), the IRS might disallow the deduction.
• Have no exportable audit reports. Some free or "lite" versions of apps track distance but don't generate reports that might be helpful during an IRS audit. Paid versions of apps such as MileIQ or Stride are popular because they build these logs, but you must ensure you're using a version that exports full data.
• Experience technical "dead zones." GPS relies on satellite signals. In "concrete jungles" with high-rise buildings or rural dead zones, your smartwatch might lose the signal, resulting in inaccurate distance measurements or missed trips entirely.

To mitigate the risk of data gaps, look for mileage apps that offer offline functionality. Apps such as Timeero continue to track GPS coordinates even in "dead zones," syncing the data once your connection is restored.

Beyond live tracking, maintaining redundant digital backups of your logs is a critical — yet often overlooked — step. In the event of a smartwatch malfunction or a lost device, these backups can significantly bolster your contemporaneous records during an IRS inquiry.

Building an 'audit-proof' backup

GPS tracking is a powerful tool, but it shouldn't be your only line of defense in substantiating your IRS mileage deduction. Consider these two backup methods to supplement your smartwatch capabilities:

• The odometer snapshot. In addition to your mileage app, snap a photo of your odometer on January 1 and December 31. This helps ensure you aren't reporting business miles that exceed the number of possible miles in a given year.
• The "analog" backup. Although it feels old-fashioned, a simple notebook in your glovebox is still an IRS-sanctioned way to track mileage. If your smartwatch dies or hits a GPS "dead zone," a quick pen-and-paper entry ensures your contemporaneous log remains unbroken.

However, it's important to note that odometers can be inaccurate, as well, especially if you have worn tires, incorrect tire pressure or nonstandard tire sizes. Having two methods of recording each business trip promotes a complete record of your mileage.

The bottom line? Your smartwatch is a great tool, but like all tools, it can have flaws. If you use your watch to drive professionally and for personal fitness, the burden is on you to prove which specific miles were strictly for business. If your watch breaks, you might be out of luck.

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A little-known IRS rule and an interesting court case could mean some taxpayers get back penalties and interest they paid during the pandemic years.

Headlines make it sound huge, but the reality is more targeted, not automatic, and in flux at the moment. And, of course, most tax relief comes with deadlines.

So, the question is, are you eligible, and if so, what should you do to claim your money? Here's more of what you need to know.

Could you get a pandemic IRS refund soon?

Let's start with a little background. When COVID hit, the federal government declared a national emergency that ran from January 20, 2020, through May 11, 2023.

During that time, the IRS used its disaster authority under Section 7508A of the U.S. Code to push back various filing and payment deadlines, including due dates for 2019, 2020, and 2021 federal income tax returns.

So what? Well, a recent case in the U.S. Court of Federal Claims, Kwong v. United States, is now testing how those pandemic extensions should be applied.

In that case, the court sided with a taxpayer’s argument that some pandemic-era tax deadlines may have lasted longer than the IRS treated them. That means potentially into mid-2023, including an extra 60 days after the national emergency ended.

If that ruling ultimately holds, it could mean the IRS charged some penalties and interest too early, opening the door for refund claims.

Who might get an IRS pandemic penalty refund

Despite the big numbers being thrown around, not everyone who paid a fee to the IRS during the pandemic would be in line for a refund. The focus is generally on individuals and businesses that:

• Filed or paid late during the pandemic period and were charged penalties or interest
• Paid common IRS penalties, like late filing, late payment, or underpaying estimated taxes
• In some cases, paid additional interest tied to those charges

If you were under an IRS audit, set up a payment plan with the tax agency, or had other collection activity during that period, some of the penalties embedded in those balances could also be in play.

For people with large balances or multiple years at issue, the potential refunds could reportedly be sizable. But keep in mind, this situation is in flux and will ultimately depend on how the litigation plays out.

How the Kwong lawsuit differs from earlier IRS penalty relief

It's important to note that this situation is separate from the automatic penalty relief the IRS already rolled out for certain 2019–2021 returns.

As Kiplinger reported, in that earlier program, the IRS waived or refunded specific penalties for eligible taxpayers and issued credits and refunds on its own. (Eligible taxpayers didn't have to file special paperwork.)

This legal situation is also different from recent announcements about 2022 tax returns and refunds.

Essentially, the IRS is warning that millions who haven't filed their 2022 returns risk missing out on $1.2 billion in unclaimed tax refunds, including overpaid taxes and tax credits like the Earned Income Tax Credit (EITC). The deadline for those who did not file returns back in 2022 is April 15, 2026.

• This time, the refund opportunity stems from a court ruling, not an official, broad IRS policy. That means the tax agency isn't automatically reviewing accounts and issuing checks.
• Instead, many industry experts believe that taxpayers who may be affected will generally need to file a refund claim to preserve their rights while the legal issues are resolved.
• Some note that filing such a "protective claim" now would essentially freeze the statute of limitations for that taxpayer.

IRS pandemic penalty relief deadline

Tax refund claims come with strict time limits, usually based on when a return was filed or when the tax was paid. Because these penalties and interest date back to the pandemic years, some windows on 2020 and 2021 liabilities could start closing as soon as 2026.

As a result, some practitioners are treating mid‑2026 (i.e., July 10, 2026) as a practical "deadline" for many potential claims under this development.

There’s another catch. It wouldn't be surprising if the IRS contests the court’s reading of Section 7508A through an appeal. So, refunds under the Kwong legal theory aren't guaranteed.

How to check if you might qualify

If you’re wondering whether you’re one of the “millions” being talked about, the best place to start is your own IRS account history. You can:

• Log in to your IRS online account or pull account transcripts and look for penalties and interest posted between 2020 and mid‑2023.
• Flag any charges for late filing, late payment, underpaid estimated taxes, or interest on slow‑moving refunds tied to those years.
• Consult with a tax professional whether those items might fall under the extended‑deadline interpretation and whether it’s worth filing a refund request for penalties and interest (Form 843) in your situation.

Even if the court ultimately narrows who qualifies, this situation underscores how much timing matters in the U.S. tax system.

And for those who struggled through the pandemic and then paid extra for missed shifting deadlines, this might be a rare chance to get some of that money back.

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When you file a joint tax return, the IRS views you and your spouse as a single legal unit. If your spouse commits any tax errors or fraud, you could be in hot water.

That is because the concept of "joint and several liability" means the IRS can legally collect the entire tax debt from you, even if your spouse earned all the taxable income or committed all the fraud or errors.

However, the tax law provides an "escape hatch" known as innocent spouse relief. It's applicable in instances in which the IRS determines it would be unfair to hold one spouse jointly liable for a tax debt.

If you're facing a massive tax bill due to your partner's misdeeds, here's how to determine if you qualify for tax relief and what steps to take to proceed.

Who qualifies for IRS innocent spouse relief?

"Innocent spouse" relief is exactly what it sounds like: The spouse claiming relief didn’t know about the tax return’s irregularities.

If you think you qualify for this type of relief, you must show that:

1. You filed a joint return with a tax understatement, i.e., the tax liability reported on the return is lower than the true tax liability.
2. The understatement was the result of your spouse not reporting income or taking improper tax deductions.
3. You didn't know, and had no reason to know, about the understatement when you signed the return.

What does "reason to know" mean? This IRS standard asks whether a reasonable person in the requesting spouse’s shoes should have known about the understatement. Factors the IRS will take into account include:

• Education and experience. The requesting spouse’s level of education and financial expertise.
• Financial involvement. The requesting spouse’s involvement in the household’s finances.
• Lavish spending. Whether there were lavish or unusual expenditures compared with the normal standard of living, which should have alerted the requesting spouse that more money was coming in than was being reported.
• Deceit or evasiveness. Whether the non-requesting spouse was secretive about the mail, bank accounts or tax records.

The IRS will consider all the facts and circumstances of the request and determine whether it would be unfair to hold the requesting spouse responsible for the tax understatement.

Should the IRS deny relief, the requesting spouse can appeal the denial to the U.S. Tax Court, which will review the request anew (without reference to the IRS’s findings).

Spousal abuse and control are a special consideration. The IRS and the Tax Court take spousal abuse and domestic violence seriously, giving both significant weight in their findings.

For example, the knowledge factor, i.e., whether the requesting spouse knew or had reason to know about the error or fraud, can be mitigated if the spouse was abused or under financial control (in which their access to money or information was limited).

If the requesting spouse signed the tax return under duress, the IRS might treat the "reason to know" factor as favoring them, even if they were aware of the errors or the fraud.

Innocent spouse relief: IRS Form 8857

For innocent spouse relief, the requesting spouse must file Form 8857 (PDF) within two years after the IRS begins collection activity for the tax year in question. The following are considered "collection activities":

• Issuing a Notice of Intent to Levy
• Garnishing wages
• Offsetting a tax refund
• Filing a claim in a court proceeding in which they're a party (e.g., bankruptcy or probate)

Tip: Don’t wait to file Form 8857 to request relief because you don’t have all the documentation you need, such as your ex-spouse’s records. You can always provide the missing documents while the case is ongoing. Be aware that in filing Form 8857, the IRS will contact your ex-spouse.

When 'I do' becomes 'I don’t'

If you find yourself saddled with the tax misdeeds of your spouse about which you knew nothing, file a Form 8857 with the IRS asking for innocent spouse relief. As mentioned, you shouldn’t delay; you must do this within two years after the IRS begins its collection activity.

Be prepared for the tax agency to look not just into your financial life but also into various aspects of your relationship with your spouse.

That process might feel uncomfortable, but if it means shedding a life-altering tax debt you didn’t create, it might be a necessary trade-off. Consult a trusted tax professional to see whether innocent spouse relief is right for you.

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A viral online trend claims artificial intelligence can help taxpayers uncover a bigger tax refund — even after a return has already been filed.

Users on X (formerly Twitter) have been sharing examples of using AI chatbots to review their tax filings for deductions or credits that may have been overlooked.

In one widely circulated post, a user claimed their refund increased after asking Grok, the AI chatbot developed by Elon Musk’s AI company xAI, to double-check a previously filed return. The post quickly gained traction online, attracting tens of millions of views in roughly a day.

Early IRS data indicate higher refunds than last year. As of early March, more than 36.5 million refunds totaling about $136.6 billion had been issued. The average refund is about $3,676 — roughly 10.6% higher than at the same point last year.

So, the idea that a chatbot could help identify additional refund money may sound understandably appealing.

But while AI may help explain tax rules or highlight areas worth reviewing, the process for changing a filed tax return is more structured than a viral post might suggest. Here's what you need to know.

Can AI help review your tax return?

Artificial intelligence tools like ChatGPT, Perplexity, and Claude AI, to name just a few, have improved rapidly in recent years. In many cases, AI can help taxpayers better understand tax concepts or identify questions worth revisiting.

For example, AI might help:

• Explain tax deductions or credits
• Summarize IRS rules and eligibility requirements
• Highlight areas of a federal income tax return that may deserve a second look
• Walk taxpayers through how amended returns work

In that sense, AI can serve as a useful research tool during tax season.

However, identifying a possible issue on a return is very different from actually correcting a filed tax return.

How amended tax returns work

If a taxpayer discovers a legitimate mistake after filing, the IRS requires a formal process to correct the return.

Common reasons taxpayers file an amended return include:

• A tax document, like a W-2 or 1099, arriving after the original return was filed or is corrected by the issuer
• Claiming a tax deduction or credit that was missed on the original filing
• Correcting filing status or dependent information
• Fixing income, withholding, or math errors discovered after filing

In most cases, that means submitting Form 1040-X, the official amended return used to update previously filed tax information.

Taxpayers generally have three years from the date the original return was filed — or two years from the date the tax was paid, whichever is later — to amend a return and claim an additional refund. After that window closes, the IRS typically will not issue the extra refund even if an error is later discovered.

The amended return must clearly explain what changed and why. Taxpayers must also include documentation supporting the adjustment.

In other words, a chatbot might help flag a potential issue with your return, but the IRS still requires proper documentation. If a legitimate error is found, taxpayers must file a formal amended return before the IRS can issue any additional refund.

Limits of using AI for tax advice

While AI can be useful for explaining tax rules or identifying areas worth reviewing, there are important limitations and potential consequences to consider.

A few important limitations include:

Privacy: Uploading sensitive financial information into an AI chatbot may expose personal data depending on how the platform stores or processes user inputs.

Incomplete financial information: Most AI systems don't have access to a taxpayer’s full financial documentation, including W-2s, 1099s, receipts, and prior tax records. Without that full context, a chatbot may misinterpret eligibility rules or overlook important details.

Timeliness of tax updates: AI tools may not have access to the most recent tax law changes, IRS guidance, or regulatory updates. Tax rules can change, as they did in the 2025 Trump/GOP tax bill. In some instances, chatbots may rely on outdated or incomplete information when responding to questions about recently enacted tax provisions.

Potential inaccuracies and hallucinations: AI tools can sometimes misinterpret tax law or generate incorrect explanations, particularly when dealing with complex eligibility rules or uncommon deductions.

If a taxpayer files an amended return requesting a refund they aren't entitled to, the IRS can deny the refund and may require repayment of any additional amount issued, with interest. Some taxpayers could also face accuracy-related penalties.

How the IRS uses AI

Artificial intelligence isn't new to the federal tax system. The IRS already uses advanced analytics and machine learning to review large volumes of tax data and identify returns that may warrant closer review.

For example, the tax agency uses automated systems to flag potential discrepancies, compare reported income against third-party records like W-2s or 1099s, and help prioritize enforcement resources.

How to file an amended tax return

If you identify a legitimate mistake after filing, correcting it is relatively straightforward. To amend a return:

1. Complete Form 1040-X

2. Identify the changes being made

3. Attach any supporting documentation

4. Submit the amended return electronically or by mail

The IRS notes that amended returns can take up to 20 weeks to process.

You can track the status of an amended return using the IRS “Where’s My Amended Return?” tool.

Can AI increase your tax refund? Bottom line

AI might help taxpayers better understand tax rules or identify areas worth reviewing on a return. Even so, those tools are not a substitute for the IRS process required to change a filed return. If a legitimate error is discovered, you still need to document the change and file an amended return.

Also, most tax software already checks for many common credits and deductions during the filing process. So that so-called "AI reviews" might not uncover additional refunds in many straightforward situations.

If you're unsure whether you've claimed all of the tax benefits to which you are entitled, it's good to consult a qualified tax professional who can help ensure any corrections to your return are handled properly.

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Are you one of millions of taxpayers trying to track your IRS tax refund status? Whether you're waiting for an update from the federal tax agency or simply checking your bank account daily, you might be asking yourself:

Why's my refund taking so long?

While the IRS typically processes electronic returns within 21 days, accidental errors, such as opting out of direct deposit or forgetting important documents, might trigger a manual review. According to the Taxpayer Advocate, an IRS review can turn a three-week wait into a 45- to 180-day delay.

The good news? Most of these setbacks might be preventable. To help you avoid the frustration of a stalled payout, here are five common mistakes that could accidentally delay your IRS refund status.

*Note: This article pertains to IRS tax refund status delays, not state income refunds.

1. Wrong Social Security number (SSN) or tax information could delay your refund status

The first tip might seem obvious, but having incorrect information on your tax return could seriously delay your IRS tax refund status.

In what ways might tax information be inaccurate?

• Mismatched names or Social Security numbers.
• Incorrect adjusted gross income (AGI) or filing status.
• Unmatched income documents (misreporting income from Form W-2, 1099s, etc.).
• Math errors, such as calculation mess-ups on credits or deductions.

IRS data reveal that a staggering 9 million math errors occurred in a recent filing season, leading to 8.3 million notices regarding the recovery rebate and child tax credits. Since these errors can significantly delay your federal tax refund status, you should ensure your tax work is accurate before hitting "submit" on your income return.

2. Tax refund status is delayed if not through direct deposit

Starting with tax season 2026, the IRS has effectively eliminated paper checks. This means you'll typically need to enter bank account information when filing your federal income return or risk status delays.

• While some exceptions exist (namely for those without bank access, those with disabilities, etc.), most taxpayers are required to receive any applicable tax refund via direct deposit or other electronic method.
• If no deposit information is provided, your income tax refund could be frozen or delayed, per the IRS's new rule.

If you can't open a bank account, you can use a Direct Express Prepaid Debit Card to receive your IRS income tax refund, according to the U.S. Treasury. The prepaid card functions similarly to a traditional debit card and has no enrollment fees, minimum balance requirements, or credit checks for preapproval.

3. Income tax refund delays could happen when filing a paper return

Filing a paper return can delay your federal tax refund status more than you might realize. Not only must the IRS manually enter your data (potentially contributing to longer processing times), but this filing method also adds transit delays and increases the risk of human error.

• Paper returns often require six weeks or longer to process, according to the IRS.
• Mailing your return adds, minimally, several days to a week for the filing to reach the IRS.

The IRS encourages taxpayers to file electronically for faster tax refunds. You might use free tax filing options like IRS Free File, a no-cost electronic tax preparation, or Volunteer Income Tax Assistance (VITA) to help file your return electronically (if eligible).

4. Submitting duplicate returns to the IRS could delay your tax refund

Submitting a duplicate return by mistake can delay your IRS tax refund status. Taxpayers might accidentally submit a duplicate return due to:

• Fear that the original submission wasn't received.
• When a spouse or an accountant files, and you also file, not realizing it was already done.
• "Amending" a return, such as submitting another Form 1040 to "fix" an originally filed return.

If any of these sound like you, don't panic. While multiple submissions can delay tax refunds, the IRS often catches duplicate submissions and automatically rejects them. Amended returns should use Form 1040-X after the original filing is processed instead of a second original return.

If you receive a "duplicate submission" notice from the IRS and were not expecting it, that could also be a sign of identity theft. In that case, you should follow IRS identity theft procedures to determine the root cause.

5. Forgetting to sign and date your tax documents could slow your refund

Forgetting to sign your federal tax return is another surefire way to delay your refund status, as the IRS considers unsigned tax returns invalid. Not signing your return can be easy to forget for a couple of reasons:

• Filing paper forms. While most tax software programs require you to sign before you electronically file, paper filers are solely responsible for remembering.
• Missing joint signatures. For those filing jointly as a married couple, both spouses must sign the return.

Did you forget to sign your income tax return? The IRS will typically mail it back to the address on the filing and request a signature. This process can significantly delay your federal income tax refund, but it typically results in no fees or fines from the IRS (if you're owed a refund). Wait for the notification and promptly follow the steps inside.

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As the 2026 filing season is now in full swing, some taxpayers may find their refunds temporarily delayed or even frozen due to changes in how the IRS delivers payments.

Under new rules, the tax agency is phasing out paper refund checks. As a result, refunds may be put on hold if a filer's direct deposit information is missing, incomplete, or rejected.

That is notable for a couple of reasons.

According to the latest IRS reporting, taxpayers are seeing refunds run about 10% higher on average than this time last year. The average refund amount is just over $3,700, and that's likely due to changes in the Trump/GOP tax and spending bill enacted last year.

And…recent polls suggest that many plan to use that money to pay down debt or cover essentials.

For example, a survey conducted by Atomik Research and commissioned by Metro by T-Mobile finds that 59% of Americans plan to use their tax refund to pay off debt or cover core expenses like rent, utilities, or transportation costs.

So, what's happening with frozen or delayed refunds, and what should you do if you receive a letter from the IRS about it? Read on to learn more.

Related: The IRS May Change Controversial CP53E Letters

IRS sending direct deposit letters to more than 830,000 taxpayers

As Kiplinger has reported, the federal government, including the IRS, is moving away from paper checks as part of an initiative to modernize payment systems.

Data show that paper refund checks are more prone to loss, theft, or mail delays, while electronic deposits provide faster, safer, and more efficient transfer.

As a result, taxpayers who don't provide valid direct deposit information or whose banks reject the deposit may receive a formal notice instructing them to update their banking details.

These CP53E notices are part of the new verification process to help ensure that refunds are credited to the correct accounts.

• The IRS says that when you receive the CP53E notice, you have 30 days to update or add a new bank account.
• When you do, you should receive a message indicating your bank account update was successful.
• If you don't respond to the letter, the agency says it will issue a paper check after 6 weeks.

However, the Taxpayer Advocate Service (TAS) has indicated that taxpayers should take the notices seriously and respond promptly to avoid unnecessary delays.

Why are IRS refunds being delayed?

The IRS may temporarily hold your refund if the agency cannot successfully process a direct deposit. This can happen when:

• The taxpayer didn't provide direct deposit information when filing
• The bank rejects the deposit due to an incorrect routing or account number

In any case, the IRS will issue a letter asking you to update your direct deposit information through your IRS online account.

Though, as mentioned, you usually have 30 days to respond. And yes, if you fail to respond, the IRS may eventually issue a paper check, but the process can take additional weeks.

Who's impacted by the direct deposit change?

Most taxpayers won't see major delays. The IRS reports that roughly 36.5 million refunds have already been processed so far this tax season.

However, certain people are more likely to be affected, including:

• Taxpayers who historically relied on paper checks
• Individuals who don't have a bank account or have left the direct deposit section blank
• Those who entered incorrect banking information on their returns

Also worth noting: Some taxpayers remain exempt from the electronic requirement, like certain international filers, minors, incarcerated individuals, and decedents’ estates.

IRS refund delays draw scrutiny from lawmakers

More recently, concerns about IRS processes have also drawn scrutiny on Capitol Hill.

Congressional Democrats on the House Ways and Means Committee said the agency has sent notices to nearly a million taxpayers whose refunds were delayed because they didn't include direct deposit information.

In a March 9 letter to Treasury Secretary Scott Bessent and IRS leadership, lawmakers warned the notices leave affected filers with few options to quickly receive their money, in some cases forcing them to wait 10 weeks or longer for a paper check.

They also called on the agency to explain why the notices were issued so broadly and to improve the process for taxpayers to provide or update direct deposit details to avoid similar delays in the future.

"Having reviewed the IRS notice and called the IRS phone lines, we learned that there is no simple process for these taxpayers to request an immediate release of their refund by paper check without waiting at least 10 weeks," the Democratic Lawmakers wrote.

"Effectively, the President, unilaterally through his Executive Order, is causing undue hardship on millions of Americans by delaying their paper refunds for months," lawmakers added.

IRS direct deposit letter: Bottom line

Larger tax refunds for some so far this year reflect the 2025 Trump/GOP tax legislation, which expanded deductions and other benefits for many taxpayers. While those changes are welcome news for some households, new IRS direct deposit rules and verification letters can be confusing.

Keep in mind that the IRS will only request banking information via official letters mailed, not by phone, text, or email.

If you receive a letter, update your direct deposit information through their IRS Online Account as instructed to get your refund as quickly as possible.

If you haven't filed yet, double-checking routing and account numbers before submitting your return can help prevent errors and processing delays.

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Have you received your retirement tax refund yet? You might soon. The IRS is reporting the average tax refund is $2,548 as of mid-February. That number includes retiree refunds.

Tax refunds might be higher for older adults because of the new "senior bonus" deduction introduced in the 2025 Trump tax bill. This tax break allows folks age 65 and older to deduct up to $6,000 per individual from taxable income. That can translate to hundreds of dollars in tax savings, depending on your income.

If you haven't already thought of spending that money, now's a great time to do it, before those newfound funds burn a hole in your wallet. Here are three smart ways to spend your retirement tax refund and help your financial position in 2026.

*Disclaimer: This article addresses federal tax refunds only. States might have different tax treatment of the items discussed. Consult with a tax professional when necessary.

Understanding the 2026 'senior bonus' deduction for retirees

Before we get into the smart ways to spend your retirement tax refund, it might be helpful to understand why you might be getting a bigger check. The most likely reason for this 2026 tax season is the bonus deduction for older adults.

The "senior bonus" deduction is a new tax break for adults 65 and older. The maximum tax benefit for this deduction is $12,000 if married filing jointly (and both adults qualify) or $6,000 per individual.

However, certain income limits apply.

• For instance, the deduction starts to phase out for those with modified adjusted gross income (MAGI) of $75,000 and higher (single) or $150,000 and higher (joint filers).
• The "senior bonus" tax deduction disappears completely for those with MAGI at $175,000 and higher (single) or $250,000 and higher (married joint couples).

For more information, check out Kiplinger's report, Over 65? Here's What the New $6K Senior Tax Deduction Means for Medicare IRMAA.

1. Pay off credit card debt and more in retirement

Unfortunately, debt comes for us all, and retirees are no exception. According to the National Council on Aging, many older adults have debt in retirement.

• Among nearly half of all U.S. households age 65 and older that have debt (other than a mortgage), 85% have credit card debt.
• About one in four older adults is still paying a mortgage after 65.
• Roughly 7% of older adults have unpaid medical bills.

Why not use part of your retirement tax refund to pay the bills?

While not as much fun as a payday or shopping trip, eliminating high-interest obligations — like credit cards and personal loans — can save you hundreds in interest charges and significantly reduce financial stress in retirement.

If your retiree tax refund doesn't cover all your debt, you might be able to negotiate a settlement with your creditors. Keep in mind that forgiven debt can have some negative financial impacts:

• Tax liabilities. The IRS generally treats forgiven debt like taxable income. For example, if a creditor reduces a $10,000 balance to $6,000, the $4,000 difference must be reported on your federal tax return.
• Prepayment penalties. Some loan agreements charge fees for early repayment.
• Credit impact. Settling a debt for less than the full amount can damage your credit score.

Before finalizing any settlements, consult with your creditor or a qualified financial adviser to understand the impact on your specific situation. Using a portion of your 2026 tax refund toward paying down debt can be a disciplined first step toward long-term financial stability.

2. Invest in the safest tax-free investment and emergency funds

While 25% of taxpayers view their refund as "free money," a smarter approach for 2026 is to treat those incoming funds as an investment opportunity.

According to a recent Empower survey, more than half of all Americans plan to rely (or already rely) on personal savings and investments during retirement. Using 401(k) accounts, earnings and dividends from stocks, and individual retirement account (IRA) investments might be a vital part of your retirement plan.

It's important to balance those options with more flexible or low-risk investments. Otherwise, you could be in for some unintended financial consequences.

For instance, a market downturn can deplete your retirement savings in an IRA if the investment options are moderate-to-high risk. Earnings and dividends from stocks invested outside of an IRA may be subject to high capital gains tax.

In addition, 401(k)s (and other tax-deferred, employer-sponsored plans) are subject to required minimum distributions (RMDs). An RMD is basically the government telling you when and how much to withdraw from your retirement savings account after a certain age.

For these reasons, using your retirement tax refund to invest in low-risk options such as high-yield savings accounts or certificates of deposit (CDs) could help diversify your 2026 portfolio and bring about a few financial benefits:

• By investing outside an IRA, you might gain more flexibility in managing annual taxable income and reduce the impacts of market volatility on your investments.
• By keeping some funds in a short-term CD, money market, or high-yield savings account, you'll be more liquid, should you have a sudden medical, home or personal emergency.

Cash equivalents such as high-yield savings and CDs are typically best used within one to five years and as part of a balanced retirement strategy. Consult with your financial adviser when appropriate.

Is there a tax-free investment? Municipal bond interest is generally considered "tax-free" at the federal level, making it a popular choice among retirees. However, municipal bond interest still counts toward Social Security benefit taxation and capital gains taxes, and can trigger Medicare Part B/D surcharges (if you earn more than a certain amount).

In general, municipal bonds are best suited for retirees looking to minimize their taxes rather than maximize high growth and income.

3. Lower tax in retirement for 2026

Although tax refunds are projected to be higher on average this year, any individual refund could be low.

If your retirement tax refund was lower than expected and you want to change that for next year, you could utilize your current refund on expenses that qualify for itemized deductions.

By strategically "bunching" expenses into a single calendar year, you might exceed the standard deduction ($16,100 for singles, $32,200 for married joint couples), thereby reducing your overall tax liability for tax year 2026. (You'll use those amounts for returns typically filed in early 2027.)

Here are a few key areas in which you might find itemized deductions in the course of 2026 spending:

• Charitable contributions. Donating to a qualified 501(c)(3) organization remains one of the most effective ways to increase itemized deductions, though several tax changes affect charitable donations in 2026.
• Medical and dental expenses. You can deduct qualified unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI). This might include procedures and retirement home improvements required for medical care.
• State and local taxes (SALT). Keep track of all your property and state income taxes paid (or sales tax, which is useful if you live in a no-income tax state). These expenses might be counted toward your federal SALT deduction cap, up to $40,400 for the 2026 tax year.

There might be more competing priorities on which to spend your retirement tax refund.

Recent data indicate that the average grandparent spends $3,917 on their grandchildren each year (among those who give support). That's not counting daily retirement expenses, like mortgages, utilities, and health care.

If your retirement tax refund is already earmarked for these essential expenses, maintain your current plan. However, if you have surplus funds, re-investing them into next year's tax strategy is a smart way to preserve your wealth.

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Contrary to what some might believe, retirement doesn’t automatically shrink your tax bill. That's because income sources, such as required withdrawals, Social Security benefits and investment gains, can quietly push you into higher federal tax brackets.

Understanding these and other retirement tax traps can help you avoid surprises in 2026 and make your retirement dollars go further. Let's dive in.

Retirement Tax Traps to Know

1. Required minimum distributions (RMDs)

Starting at age 73, retirees must take required minimum distributions (RMDs) from traditional IRAs and 401(k)s. Missing an RMD or withdrawing the wrong amount can trigger a penalty of up to 25%.

Under the SECURE 2.0 Act, that penalty can drop to 10% if the mistake is corrected in a timely manner using IRS Form 5329. Large withdrawals can also push other income into higher tax brackets.

RMD key points:

• RMDs are calculated based on your account balance and IRS life expectancy tables.
• Each account has its own RMD, so multiple accounts require separate calculations.
• Even small miscalculations can cost thousands of dollars.

Example:

Imagine a retiree with a $400,000 IRA whose RMD for the year is $15,000. If they fail to withdraw it on time, the penalty could be $3,750 (25% of the RMD). By correcting it quickly, that penalty drops to $1,500, saving $2,250 — all without changing their overall retirement plan.

Tax tip. Plan withdrawals strategically. Splitting RMDs across multiple accounts or timing them in lower-income years can help manage your tax burden. Always correct any missed RMDs promptly to minimize IRS penalties.

2. Social Security benefits and how they're taxed

Up to 85% of Social Security benefits might be taxable depending on your "combined income." Other retirement income, such as IRA withdrawals, pensions or investment dividends, increases that amount, which can make more of your Social Security subject to federal income tax.

Key points about taxes on SS benefits:

• Combined income equals AGI plus nontaxable interest plus half of Social Security benefits.
• Even a modest 401(k) withdrawal could push you from 50% to 85% of your benefits being taxable.

Example:

Suppose a single retiree receives $20,000 in Social Security and $15,000 from IRA withdrawals. Their provisional income would be $20,000 divided by 2 plus $15,000 equals $25,000, putting 50% of their Social Security benefits into taxable income. If they withdraw $10,000 more from their IRA, their provisional income rises to $30,000, and up to 85% of benefits could become taxable.

Tax tip. Monitor your combined income. Consider timing withdrawals from taxable accounts to reduce the taxable portion of your benefits.

Note: You might have heard that the Trump/GOP 2025 tax and spending bill eliminates taxes on Social Security benefits. It does not. (The new law doesn't change the Social Security benefit tax formula or the IRS "combined income" thresholds.)

But the 2025 Trump tax bill contains a new tax deduction for older adults.

Senior Bonus Deduction key points:

• Beginning with the 2025 tax year, retirees age 65-plus might be eligible for a “senior bonus” deduction of up to $6,000 ($12,000 for joint filers).
• That's even if they take the standard deduction or itemize.
• You must have a valid Social Security Number to claim the credit.

The new deduction can lower taxable income and thereby potentially reduce the portion of Social Security benefits subject to federal income tax. However, the benefit phases out for higher earners.

For more information, see our report: How the $6,000 Senior Bonus Deduction Works.

3. Taxes on investment gains and dividends in retirement

Even in retirement, sales of stocks, bonds and mutual funds can trigger capital gains taxes. Long-term gains are taxed at 0%, 15%, or 20%, depending on income. Additionally, the net investment income tax (NIIT) of 3.8% can apply to higher earners. Dividends are also taxed differently depending on whether they are qualified.

Key points on capital gains taxes in retirement:

• Capital gains rate thresholds are indexed for inflation each year. Knowing those thresholds can help you time investment sales.
• Tax-loss harvesting or strategic sales in lower-income years can help reduce taxable gains.

Example:

A retiree sells $50,000 worth of stock gains in a year with little other income and pays 0% long-term capital gains tax. In a year with higher withdrawals or pensions, that same $50,000 could be taxed at 15% or higher.

Tax tip. Harvest gains in lower-income years or use tax-loss harvesting to offset taxable gains.

4. How much the IRS takes from your pension or annuity

Most pension payments are taxable as ordinary income. With annuities, the portion representing earnings (not principal) is taxed. Large pension payouts or annuity distributions can unexpectedly push you into a higher tax bracket, affecting other income sources such as your Social Security benefits.

Key points on annuity and pension income tax in retirement:

• Some states also tax pension income.
• Stacking multiple pension or annuity payments, without planning, can create a surprise tax burden.

Example:

Retirees receiving a $40,000 annual pension and $20,000 in IRA withdrawals could find themselves in a higher federal bracket than expected, causing a larger portion of Social Security benefits to become taxable.

Tax tip. If you have multiple income streams, consider staggering distributions to avoid stacking taxable income.

5️. State taxes on retirement income

Relatively few states are truly tax‑friendly on all types of retirement income. Many either tax pensions and IRA withdrawals or offer partial tax breaks on retirement income. Even small changes in residency can affect your taxes.

Key points on state retirement taxes:

• State taxes on retirement income can add thousands in extra costs.
• Rules vary by state and income type. For example, some states might tax pensions but not Social Security, or vice versa.

Example:

Some retirees move from low- or no-income-tax states such as Texas or Florida to higher-tax states to be closer to family or for lifestyle reasons. For instance, a retiree relocating from Florida to North Carolina might find that their IRA and pension withdrawals are now fully taxable, while Social Security remains fully exempt. That could add anywhere from $5,000 to $10,000 or more in state taxes annually, even though their federal tax situation hasn’t changed.

Tax tip. Before relocating, research both federal and state tax implications of your retirement income. A tax-friendly move can protect more of your nest egg, while an overlooked state rule can create unexpected costs.

To learn more, see our guide: Retirement Taxes: How All 50 States Tax Retirees.

Retirement taxes: Bottom line

Even routine distributions and benefits can carry tax consequences. For retirees, monitoring RMDs, Social Security, investment income, pensions and new state tax rules now can help you avoid surprises at tax time.

To stay ahead of the curve, review your expected income streams, plan withdrawals strategically, and consult a tax professional to optimize your retirement tax strategy.

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If you plan to file a tax return on paper during the 2026 filing season and are expecting a refund, you’ll likely have to wait a while before you get your money.

It will take the IRS four to six weeks to process your return, assuming there are no mistakes in your tax filing.

If you plan to file electronically, as the overwhelming majority of individual taxpayers do, the IRS says your refund would be directly deposited into your bank account within 21 days.

Notably, the tax agency had set a goal to speed paper return processing in time for the current tax filing season, but it hasn’t materialized. What happened, and what does it mean for you if you want (or need) to file a paper return this year?

Why does paper return processing take so long?

According to the National Taxpayer Advocate’s Annual Report to Congress, despite 94% of taxpayers filing their tax returns electronically, "tens of millions" of taxpayers still file original paper returns.

During a filing season, besides Form 1040 (PDF), the IRS receives other types of paper tax forms, such as amended individual returns (Form 1040X) (PDF) and business payroll Forms 940 (PDF) and 941 (PDF), to name a few. Then there’s taxpayer correspondence.

All this paper has to be manually processed. After arriving at an IRS processing facility, employees:

• Sort the returns by form type and category, then route them to the appropriate area.
• Screen a return for completion, then send the return into the processing pipeline.
• Manually key in the numbers from each line of the return into the IRS system.
• Send the return to an automated system for validation and error checks.
• If the return passes all checks, it’s approved by the IRS. If a refund is due, the money is deposited into the taxpayer’s bank account, or a check is sent to the taxpayer (the IRS is phasing out paper checks in 2026).

It takes the IRS four to six weeks to process an error-free Form 1040 paper tax return. If there are return errors, questions or if the agency determines a return needs special handling, e.g., if there’s a question of identity theft, the process can take months.

Speeding things up: The Zero Paper Initiative (ZPI)

To address some of those issues, the IRS launched its Zero Paper Initiative (ZPI) in April of last year. According to the tax agency, the project’s goal is to convert paper filings into streamlined digital formats for electronic processing.

Essentially, paper filings, including individual tax returns, would be converted to digital formats by automatically scanning them with machines and extracting the data, which would then be processed like any other electronically filed return.

The IRS has been experimenting, off and on, with electronic processing of paper tax forms for decades, and ZPI is the agency’s latest push. ZPI is especially salient now as it offers the added benefit of helping to offset the loss of thousands of employees in the agency’s submissions processing and account management functions.

As Kiplinger has reported, those IRS staffing cuts resulted in part from the Department of Government Efficiency’s (DOGE) efforts last year to reduce the federal workforce and a hiring freeze imposed on the IRS.

For ZPI, the IRS chose to outsource the scanning work and lined up four private contractors for the pilot. The contracts required a minimum processing threshold of 70,000 returns per vendor per week, which would be scaled up once the threshold was met.

The pilot ran into snags almost from the start, and it wasn’t until December 2025 that one vendor (eventually) reached the minimum processing threshold. It was obvious by then that ZPI wouldn’t be operational in time for the 2026 filing season.

What does this mean for your paper return?

It’s unfortunate for taxpayers who need to file paper returns that ZPI was unable to meet its goal of being up and running by the 2026 tax filing season. The core problem is that:

• Form 1040 digitization is not fully implemented.
• Schedules and attachments (Forms W-2, 1099, etc.) are largely handled manually.
• Amended returns continue to require manual handling.
• Nonstandard paper submissions (e.g., handwritten) continue to slow down paper flows.

It seems there are two primary reasons why so much of the paperwork still must be manually processed.

First, there’s the delay in the rollout of the vendor’s scanning equipment. The second is the fact that the IRS’s legacy computer systems can’t reliably process optical character recognition/barcode data. That the submission processing centers are inadequately staffed only magnifies the difficulty of getting returns processed promptly.

• If you still plan or need to file a paper Form 1040 (PDF) this year, you’ll have to be patient above all. Since the forms are being handled manually, calling the IRS to inquire about your refund (if you’re due one) is unlikely to yield a satisfactory answer.
• You might not reach an employee due to staffing shortages, or you might be connected to a chatbot.
• For the same reason, continually checking the IRS’s Where’s My Refund online tool is also unlikely to give you the information you’re looking for. Manual processing takes time.

What you can do is keep an eye on the IRS’s processing status for tax forms page. You won’t find information about the status of your return, but it will tell you the batch of paper returns currently being processed.

By taking note of the date you mailed your return, you can get a very rough idea of where you are in the queue.

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Do you have a child under 18? If so, claiming their Trump Account just got a lot easier this month.

The U.S. Department of the Treasury recently launched the long-awaited mobile app for one of the most talked-about provisions of the 2025 Trump/GOP tax and spending law.

Trump Accounts are designed as a child-focused savings vehicle to provide a financial head start for a beneficiary's higher education, first-time homeownership or other qualified costs. For children born from 2025 to 2028, the federal government will seed the account with a $1,000 pilot contribution.

So far, more than 4 million children have been signed up for Trump Accounts, according to the IRS, with 1 million claiming the "free money" contribution program.

While the new app is officially rolling out and the first wave of government funds is scheduled to drop this summer, you might be wondering how to get started. Here's how to submit your paperwork, activate the app, and what comes next.

Related: New Trump Account Spinoff Launches in Only 23 States: Is Yours on the List?

Trump Account for kids: What it is, how to claim and the new app

Trump Accounts, also called 530A accounts, are tax-deferred investment savings designed to help save for future qualified expenses.

Although parents and employers can contribute a combined $5,000 per year to Trump Accounts, the biggest draw right now is the opportunity to claim a "free money" seed deposit from the federal match program.

The process starts with the IRS. By submitting Form 4547, taxpayers can elect to open an account and request a one-time $1,000 federal deposit for qualifying children. Once that form is processed and the account is opened, parents will be able to fully manage, track and build the investment using the newly released official Trump Accounts mobile app.

Note: The app is available for download on the Apple App Store and Google Play. It will serve as your primary digital dashboard for tracking the $1,000 deposit (if applicable), making contributions and watching the account's growth.

Trump Account Enrollment Steps

Step 1: File Form 4547

You can start the application process for a Trump Account by filing IRS Form 4547, Trump Account Election(s), only if you're the parent, legal guardian, grandparent, or adult sibling of a beneficiary, in that order).

When you're filling out the form, keep these key items in mind:

• There is no cost to open a Trump account.
• Parents, employers, charitable organizations and governments can contribute money to your child's Trump account (once the funding process is available).
• However, your child can only receive those contributions if you open an account.

If you want more information before opening a Trump Account, visit the official website at TrumpAccounts.gov.

Step 2: Check your email for a Trump Account letter

After you've signed your child up for a Trump Account, the federal government will contact you regarding account opening information.

• An email will arrive from no-reply@TrumpAccounts.Treasury.gov to confirm your election to open a Trump Account (emails started going out late last month).
• Follow the instructions in that email to complete your account activation.
• You can't make any contributions to your child's Trump Account until July 4, 2026.

Note: The Treasury also cautions taxpayers to remain vigilant against scams. Only the email address listed above will send information about Trump Accounts; the Treasury will not contact parents via text message or phone call regarding account activation.

Step 3: Download the official Trump Account app

Once the Treasury confirms your election to open a Trump Account, you can download the official mobile app. It's currently available on the Apple App Store and Google Play for both iOS and Android devices.

To avoid potential scammers, only access your child's Trump Account information via the official app or by typing "TrumpAccounts.gov" into your browser's URL. Customer support is also available through the official Trump Accounts app.

Employer contributions and what comes next

Although the federal government provides the initial $1,000 match for qualifying infants, some employers are expanding that deposit.

More than 25 companies have pledged an additional one-time $1,000 deposit for employees with qualifying children, including (but not limited to):

• Bank of America, Broadcom, Charles Schwab, Chipotle Mexican Grill,
• Coinbase, Comcast, Continental Resources, Dell, IBM,
• Intel, JPMorgan Chase & Co, Mastercard, NVIDIA, Robinhood Markets,
• Russell Investments, Steak 'n Shake, SoFi Technologies,
• Visa, Wells Fargo and Uber.

High-profile donors Michael and Susan Dell, Ray and Barbara Dalio, Nicki Minaj, and Brad Gerstner have also pledged additional, targeted contributions to fund some accounts, and each donation has different eligibility requirements. For example, the Dell donation is for children age 10 and under who live in ZIP codes with a median income of $150,000 or less.

So far, all philanthropic contributions are expected to approximate about $250 per qualifying child (except for Minaj's donation, which was not pledged on a per-child basis).

As 2026 rolls on, more companies might join this list, especially as the July 4 Trump Account activation date approaches. Stay tuned for updates.

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Does the idea of filing your tax return make you wait until the last minute? Do you only start gathering your tax documentation at year-end? You aren’t alone.

Every year, taxpayers can fall into "bad tax habits" that seem convenient in the short run but may later lead to significant refund delays or even a dreaded IRS audit. Fortunately, there are simple, strategic shifts you can make right now to kick these bad habits to the curb.

From tracking your "sweat equity" to staying informed through tax podcasts, here are several ways you can avoid common bad tax habits in 2026.

1. Disorganized tax documents

We're all disorganized from time to time, especially when it comes to something as mundane as filing income taxes.

But when you don't keep track of your itemized receipts or fail to maintain proper tax records, you risk filing an inaccurate return, which could lead to lost deductions, expensive penalties, and a higher risk of an IRS audit.

How to kick the "feels poorly organized" tax habit:

• The 15-minute review. Set aside 15 minutes weekly to organize your tax documents. By breaking tax file preparation into smaller chunks, you'll feel less daunted by the task and more prepared come the April 15th tax deadline.
• Digitize your tax records. Ditch the physical folder for a secure, encrypted cloud database or dedicated tax-scanning app. Most tax software now allows you to upload photos of receipts and other documentation directly from a digital folder.
• "Disaster-proof" your plan. Maintain one or two backup copies of all tax documentation. That way, if a disaster occurs (like hardware failure, fire, or flood), you won't have to start your tax filing all over again.

2. Waiting until the last minute to file taxes

Are you delaying your filing because you're convinced you don't have every single piece of paperwork?

Although waiting for a final 1099 or Form W-2 to arrive in the mail is prudent, procrastinating simply because you can "do it later" is another common bad tax habit. Left unfettered, this practice can lead to filing errors, tax refund delays, and even increase the risk of identity theft, since criminals often file earlier in the season.

How to kick the "wait until the last minute" tax habit:

• Reframe the task. View taxes like you would a medical check-up. This is your opportunity to assess your economic health, ensure your withholding is correct (more on that later), and maximize your tax breaks.
• Remember that you're beating the fraudsters. Data shows that early filers are significantly less likely to be victims of tax-related identity theft. That's because the IRS accepts returns on a first-come, first-served basis. So if a criminal steals your Social Security number and files before you, your return could get rejected.

3. Accidentally forgetting or misreporting income

According to a recent survey conducted by Finder.com, roughly 33% of Americans with side gigs fail to report that income.*

That's a problem, considering the IRS receives copies of your 1099s (where side income is often reported), and can tell when an amount isn't reported. This may result in automatic notices, penalties, and interest owed on the unreported income.

How to kick the "unreported income" tax habit:

• Don't rely on your memory. Log in to your third-party payment processors (PayPal, Venmo, Uber, etc.) and ensure you're reporting all your income.
• Go on a tax scavenger hunt. Search places you normally wouldn't for any spare income you need to report. For instance, you might check your email inbox for keywords like "1099" or "Tax Statement," or you might scroll through your bank account for unexplained checks, transfers, or deposits.
• Log as you go. Use a simple spreadsheet or app to log every payment that you find during your tax scavenger hunt. By tracking income in real-time, you'll eliminate the need for a "hunt" next tax year.

See also: 12 Tax Strategies Every Self-Employed Worker Needs in 2026.

*The survey was conducted in 2017 on 2,245 Americans, ages 18 to 88.

4. Mixing personal and business expenses

While we're on the subject of side gig income, it's incredibly important to remember that your business and personal expenses should be kept separate. The IRS strictly disallows any personal items to be counted on your federal income tax return.

Consistently failing to keep business and personal finances separate can lead to unclaimed tax breaks, an increased risk of an IRS audit, and even expose a taxpayer's personal assets to business lawsuits or debts.

How to kick the "mixing personal and business" tax habit:

• Maintain separate accounts. You should have dedicated business accounts for credit cards, banks, and third-party payment processors. These should be different from the ones you use to split dinner checks with friends.
• Pay yourself a "draw." Don't use your business account as a personal ATM. Instead, regularly transfer a set amount from your business account to your personal account. This creates a clean "salary" trail to help protect the integrity of your business structure.
• Monthly reconciliation. Set aside time at the end of each month to "reconcile" your accounts — tracking every expense in your business folder. If you see a charge for a hair salon or grocery haul in your business ledger, correct the error immediately.

5. Missing cost basis

For many, the "cost basis" of a stock, cryptocurrency, or piece of real estate may sound confusing, but ignoring this crucial tax topic can be a costly bad habit.

Simply put, the cost basis of an asset is typically the purchase price plus any commissions, fees, or (in the case of your house) home improvements. You use the cost basis to determine your taxable gain or loss when you sell the asset.

Only using the purchase price (and not any of the additional factors) can cause you pay more in capital gains tax when you sell. Basically, you'd pay tax on profit that doesn't exist.

How to kick the "miscalculated cost basis" tax habit:

• Track your "sweat equity." Homeowners should maintain a permanent file for new additions and other renovations. These costs increase your basis and can significantly lower your taxable gain if you sell your home.
• Audit your 1099-B and 1099-DA. Don't assume your brokerage or crypto exchange has the right numbers, especially for assets transferred between platforms. Cross-reference your 1099-B (for stocks) and the new 1099-DA (for digital assets) with your own records.
• Watch your "wash sale" rule. If you sold a stock at a loss but bought a "substantially identical" one within 30 days, your loss is disallowed for now and instead added to the basis of the new stock.

6. The "same as last year" filing trap

It's easy to feel overwhelmed by tax law changes, especially this year.

The 2025 Trump/GOP tax and spending bill introduced a wave of new temporary breaks, like the overtime and tip deductions, the car loan interest deduction, and the "senior bonus" deduction.

Trapped by choice paralysis, you might think it's easier to just go with what you did last year and ignore the new tax law changes. However, you could miss out on new tax breaks you might be eligible to claim, resulting in a higher income tax liability than required.

How to kick the "same as last year" tax habit:

• The 20-minute rule scan. Instead of cramming into one weekend what the new tax bill might mean for you, dedicate 20 minutes per week throughout the tax season to read through reputable tax news. Look for any updates that apply to your lifestyle.
• Leverage "smart" newsletters. Subscribe to reputable tax-focused alerts or listen to policy podcasts during your commute. The IRS and state agencies typically ramp up their recent social media presence during tax season.
• Perform a comparison check. Before you hit submit, do a side-by-side comparison of last year's return with your current draft. If your "other deductions" line looks identical, double-check that you didn't miss any 2026 tax season updates.

7. Federal tax withholding mistakes

Although a large tax refund may feel like a bonus, getting a big deposit from filing taxes is often the result of another bad tax habit: over-withholding.

Essentially, a big tax refund means you gave the government an interest-free loan of your money, when those funds could've been invested elsewhere. Alternatively, withholding too little tax from your paycheck can result in a large, unexpected tax bill at year-end.

How to kick the "fail to optimize withholding" tax habit:

• Use the 2026 estimator. The IRS tax withholding tool allows you to determine how much tax should be withheld from your paycheck. (Though the tool does not yet have all the recent tax policy changes from the new Trump tax law.)
• Look for "life events." If you got married, had a child, or started a side hustle, you should immediately update your withholding elections with your employer on Form W-4.
• Review your pay stubs. Check your payroll portal regularly to be sure your elections were applied correctly by your employer. You can do this through a quarterly check against your projected 2026 tax liability.
• Aim for zero. The gold standard of tax planning is owe nothing and get nothing back come tax time. This means your money stayed in your pocket all year, where it could earn interest or pay down debt.

See also: W-4 Form: Tax Withholding Tips to Optimize Your Taxes This Year.

Getting better at filing your income tax return

Kicking the seven bad tax habits isn't just about avoiding an audit — it’s about reclaiming control of your finances during tax time.

Even though the 2026 tax landscape is more complex than it has been in recent years, breaking these bad habits can turn a season of "tax dread" into a manageable, routine check-up.

Start with one habit today, and by the time April 15th rolls around, you won't just be filing 2025 taxes — you'll have a head start on next year's income return.

Read More

• IRS Tax Season 2026 Is Here: Big Changes to Know Before You File
• Income Tax Refund Schedule: When Will Your 2026 Refund Arrive?
• 15 IRS Audit Red Flags in 2026
• Should You Do Your Own Taxes This Year or Hire a Pro?

It’s tax season again. But this year, as you gather your W-2s and 1099s, you’re also navigating the first filing season impacted by the recently enacted 2025 Trump tax law, also known as the "big beautiful bill."

With new deductions for things like overtime pay, tips, and car loan interest, plus a new Schedule 1-A, the "simple" return you filed last year might suddenly feel a lot more complicated.

You sit in your chair, eyeing the mounting pile of documents, and think: "Should I just hire someone to prepare my return?"

Deciding whether to do them yourself or outsource your taxes depends on your situation. While filing on your own is budget-friendly and gives you a clear view of your finances, a mistake, especially given the new tax rules, could mean leaving a larger-than-usual refund on the table. And for some, there's the perennial fear of a potential IRS audit.

Do you have a complex return with different forms and schedules? Are you facing major life changes? Do you have the time to do your taxes? Here is what you should consider before making your choice.

The case for filing your own taxes

Some tax returns are relatively simple and can be done on your own without a tax professional’s help. For example, you might be fine filing yourself if you are:

• Single with one income source
• Claiming the standard deduction
• Not eligible for special tax credits
• Comfortable navigating tax software

With a relatively "simple" return, it would likely take little time for you to prepare your own. Tax preparation software will guide you through the forms.

Some people may be able to handle working through a more complicated return without a tax professional's help.

If you're in that boat, there are advantages to preparing your own tax return besides cost. Doing your own taxes forces you to analyze the financial moves you took during the year. that can give you insight into:

• How much money you spent
• Whether you saved money
• Your financial well-being and financial goals

And a person tackling their taxes themselves isn’t without resources.

For example, the IRS has an Interactive Tax Assistant on its website. The tool asks a series of questions and provides responses to common tax-related issues, like the tax treatment of mortgage debt forgiveness or work-related education expenses.

There can be some disadvantages to preparing your own taxes, however.

When you prepare your own return, you might not get all the tax deductions and credits to which you’re entitled.

• Maybe you didn’t know about a particular tax break because it was recently enacted.
• Or a tax break was buried in the federal tax code, where a layperson would have a hard time finding it.
• Perhaps the tax prep software you chose didn’t explain the tax deduction or credit well, or didn’t include the correct tax form.

In these and other instances, you could end up overpaying your taxes or getting a smaller tax refund.

Additionally, there’s always a possibility the IRS will flag your return for an audit (a low risk, but not zero). Most IRS audits are correspondence audits conducted by mail, but you’ll have to handle the process yourself unless you hire a tax professional to help you.

What makes a tax return complicated?

A good way to tell if you need tax help is to think about the time you’ve spent preparing your return in the past. Did it take hours and hours? Was it complicated? If so, that’s a sign you might need a tax professional.

Your return could be complex if:

You own a business or are self-employed: Navigating the now-permanent 20% Qualified Business Income (QBI) deduction and the return of 100% bonus depreciation requires precise record-keeping to maximize your savings.

You’ve experienced major life changes: Events like marriage, divorce, or a new child change your filing status and eligibility for the expanded Child Tax Credit or the adoption tax credit.

You sold major assets or investments: Selling a home, a business, or stocks triggers capital gains rules that may be offset by 2026 inflation-adjusted thresholds or specific asset write-offs.

You manage rental properties or diverse income streams: Collecting rent or receiving income from "side gigs" can involve complex expense tracking.

You earned significant tips or overtime pay: Under the 2025 law, you may be eligible to exclude up to $25,000 in tip income or $12,500 in some overtime pay from your federal taxes — but only if you meet specific occupation and income phase-out rules.

*These are just some examples; many factors can make a return "complicated."

Choosing the right tax professional

A tax professional is someone who specializes in understanding tax laws and helping individuals or businesses meet their tax obligations accurately and efficiently.

However, if you’ve decided to hire help, it’s important to know that "tax professional" isn't just one job title. Depending on their credentials, different pros offer different levels of service and protection.

Certified Public Accountant (CPA): Licensed by state boards, these pros must hold an accounting degree and pass a rigorous national exam. They provide comprehensive tax preparation and year-round financial planning. Representation: They have unlimited rights to represent you before the IRS.

Enrolled Agent (EA). Licensed by the United States Treasury Department, EAs must pass a three-part federal exam covering all aspects of the tax code. They are tax-law specialists who focus specifically on preparation and tax resolution. Representation: They have unlimited rights to represent you before the IRS.

Tax Attorney. Licensed by state bars, these professionals hold law degrees and specialize in high-level legal complexities, such as corporate taxation or estate law. Representation: They have unlimited rights to represent you and are the best choice for legal disputes or Tax Court cases.

Non-Credentialed Preparer: These preparers generally handle basic tax returns and often work seasonally. Unlike the professionals above, they are not licensed by a state or federal board. Representation: They have limited or no rights to represent you before the IRS in the event of an audit.

These professionals are trained to know the ins and outs of the federal tax code and stay abreast of new law changes that take effect in any year.

How to find a tax pro

When searching for a tax professional, think about your circumstances. Sometimes you need a nuanced approach to your financial life.

• For example, your tax situation can change as you hit different milestones.
• Parents may need help maximizing child and family tax credits, while retirees often benefit from an expert eye to manage the complex tax rules surrounding pensions and RMDs (Required Minimum Distributions).
• If you’re a self-employed business owner, your tax needs are different from those of a business owner who elected a corporate structure.

Ask your candidate where they concentrate their practice.

As for where to find a tax professional, you may have family, friends, and acquaintances who use one. Ask them. As mentioned, you can also search official, trusted directories, like:

• IRS Federal Tax Return Preparer Directory
• Your state’s Board of Accountancy
• Your state’s CPA societies

Bottom line? Hiring a tax professional comes with a price, but filing a timely, accurate tax return that could save you money could be worth it.

Read More

• Trump 2025 Tax Bill: What’s Changed and How it Affects Your Taxes
• IRS Income Tax Refund Schedule 2026
• A Free Tax Filing Option Has Disappeared for 2026: Here's What That Means for You
• The Age When Most Taxpayers Hire a Tax Pro

Nobody likes a tax season surprise — especially when it's a bill instead of a check. While the House GOP has projected $1,000 payouts for many taxpayers under the new 2025 laws, the reality for some will be a higher income tax bill or a shockingly lower refund.

Why the discrepancy? It can come down to life changes or missed opportunities. Maybe you no longer qualify for the student loan interest deduction, or perhaps you’re leaving money on the table by taking the standard deduction instead of itemizing.

To help you avoid a shock on filing day, here are six common ways you could be paying more income taxes than necessary.

1. You overlooked the new 2025 tax credits and deductions

The 2025 Trump/GOP tax and spending bill introduced a wave of temporary tax incentives that could significantly alter your income return this filing season.

For instance, new car owners might be eligible for a car loan interest deduction, and workers earning tips or overtime might now qualify for targeted tax breaks. With the federal tax code in such a state of flux, it’s easier to overlook a major deduction or credit.

However, new and continuing tax breaks come with strict eligibility requirements, most notably income phase-outs. If your earnings exceed specific thresholds, certain tax breaks disappear, leading to a higher tax bill than anticipated.

Here are a few common tax deductions and credits with income phaseouts:

• Student loan interest deduction. For 2025 income taxes, the phase-out begins at a modified adjusted gross income (MAGI) of $85,000 for single filers and $170,000 for married couples filing jointly.
• Traditional individual retirement account (IRA) deductions. If you're covered by a retirement savings plan at work, your ability to deduct traditional IRA contributions starts to phase out at a MAGI of $79,000 for single filers and $126,000 for married couples filing jointly (for tax year 2025).
• "Senior bonus" deduction. Adults age 65 and older might qualify for this temporary tax break, but their income phase-out is $75,000 for single filers and $150,000 for joint returns.

What should you do next year? Start by reviewing various tax deductions and credits you might be eligible for. Next, look for ways to lower your adjusted gross income (AGI) so you can maximize your eligibility for tax breaks. For instance, you might increase contributions to pre-tax accounts — such as a 401(k), FSA or HSA — to directly reduce your taxable income.

Related: An HSA Sounds Great for Taxes: Here’s Why It Might Not Be Right for You

2. You claimed the standard deduction when you should have itemized

Roughly 90% of taxpayers claim the standard deduction, but this "path of least resistance" might not get you the most bang for your buck. For the 2025 tax year, several shifts in federal policy have made itemizing more attractive than it's been in years. For instance:

• The SALT cap increase. Until recently, the state and local tax (SALT) deduction was capped at just $10,000. But under the 2025 tax legislation, that cap has been raised to $40,000 for many filers. If you live in a high-property-tax state or pay significant state income taxes, this change alone could push your itemized total well past the standard deduction.
• Larger charitable contributions. New tax changes for 2026 charitable donations caused many taxpayers to donate larger gifts last year. If you increased your giving in 2025, those contributions could significantly tip the scales in favor of itemizing.

What should you do next year? Don't file out of habit. In a shifting tax policy environment, choosing whether you itemize or claim the standard deduction can change from year to year. Gather your property tax statements, mortgage interest summaries and receipts for donations and medical bills, and run the math on whether an itemized return could save you more on taxes.

Related: What's the standard deduction and who should itemize?

3. Your W-4 withholding is too low and outdated

Whether you’re starting a new role or settled into a long-term position, you should regularly review your Form W-4 (Withholding). This document tells your employer exactly how much to send to the IRS and state authorities on your behalf throughout the year.

If your tax withholding is out of date and too low, you might be build a debt to the IRS. Various life changes can increase your tax bill if your withholding isn't adjusted at least annually, like:

• Getting divorced or separated. Single and married-filing-separately statuses typically carry a lower standard deduction than those available to joint filers. Additionally, married separate filers might not qualify for certain tax breaks (like certain education tax breaks).
• Getting a pay raise. While a promotion, bonus, or raise is great news, that extra income could push you into a higher tax bracket, making your current withholding levels insufficient.
• Having a child leave home. When a child turns 17, they no longer qualify for the $2,200 child tax credit, even if they still live at home (though temporary absences, such as college, are exempt from this rule).

What should you do next year? Reviewing your withholding annually can help you avoid a surprise tax bill filled with interest and fees. Currently, the IRS failure-to-pay penalty is 0.5% of your unpaid taxes for every month (or part of a month) the balance remains, capping at 25%. Don't forget that most state agencies can apply their own underpayment penalties, adding another layer of cost to your tax bill.

4. Your side hustle income was underreported, or you missed estimated tax payments

Taking on a new side hustle during the past year means you probably owe taxes on the income generated from that work. Many freelancers and gig workers are surprised to learn that the IRS expects quarterly estimated tax payments if you anticipate owing $1,000 or more in federal taxes at year-end.

Whether you’re an Etsy seller, an Uber driver, or a freelance consultant, you'll probably receive some combination of the following tax forms when determining your income tax bill for the year:

• Form 1099-K: Reports payments received through third-party processors like PayPal, Venmo, or specialized gig platforms.
• Form 1099-NEC: Reports non-employee compensation for services you’ve performed as an independent contractor.
• Form 1099-MISC: Reports income not covered in the NEC category, like rental income.

*Note: All earned income is typically taxable regardless of whether you receive a tax form.

Failing to report your earnings throughout the year doesn't just lead to a higher bill come tax time, but can also trigger IRS underpayment penalties and interest.

Furthermore, if you aren't tracking your business expenses as you go, you might miss valid breaks (such as the home office deduction) and other overlooked tax deductions for the self-employed.

What should you do next year? Take time now to review the rules for reporting self-employment income. Depending on whether you're a full-time contractor or just a casual freelancer, your tax requirements might differ. For a deeper dive into maximizing your savings, check out Kiplinger’s report, 12 Tax Strategies Every Self-Employed Worker Needs in 2026.

5. Your tax-inefficient investments hurt your return

Did you sell a stock, bond, or piece of real estate for a profit last year? If so, that capital gain likely boosted your taxable income and potentially contributed to a higher tax bill. However, it isn't just what you sell that matters — it's where and how long you hold your investments.

Your income tax bill might be higher than expected because of these common oversights:

• Poor asset location. Keeping "tax-heavy" investments — such as high-yield bonds or actively managed mutual funds that payout frequent dividends — in a taxable brokerage account instead of a tax-deferred 401(k) or IRA.
• Frequent trading. Gains on assets held for less than a year (short-term) are taxed at ordinary income rates, which can reach as high as 40.8% when you include the net investment income tax (NIIT).
• Missing out on tax-loss harvesting. If you have winning investments, you can offset those gains by selling "losers" at a loss. If your losses exceed your gains, you can use up to $3,000 to offset your ordinary taxable income.

What should you do next year? Aim to maximize your contributions to 401(k)s, 403(b)s and IRAs to keep more of your growth tax-deferred until retirement (when your income tax rate might be lower). For your taxable accounts, try to hold investments for at least one year to qualify for lower long-term capital gains rates. Finally, make "tax-loss harvesting" a year-end habit to ensure you aren't paying more on your winners than you have to.

More: The Wash Sale Rule: Six Things to Know to Avoid Tax Pitfalls

6. You overlooked state-specific tax credits and deductions

While not every state has its own tax rules (and some states have no income tax at all), ignoring state-level credits and deductions is one of the easiest ways to overpay your year-end income tax bill.

Taking advantage of every tax break available to you could help save on state income taxes. To ensure you aren't leaving state money on the table, consider these tax resources and strategies:

• Stay current on state tax changes. Review applicable rules and any upcoming local changes to better prepare for your state income return.
• Look for how retirement taxes work in every state. If you're retired, how your state treats Social Security or pension income is vital — and could help you save on your next income tax bill.
• Check out the best low-tax states for middle-class families. Is your state a high-tax state? For some, a move across state lines might be the most effective tax strategy of all.

What should you do next year? Visit your state’s Department of Revenue website before you file. Many states have tax deductions, credits, and exemptions that can significantly reduce your state income tax liability.

Read More

• Tax Season 2026 Is Here: 8 Big Changes to Know Before You File
• 3 Popular Tax Breaks Are Gone for Good in 2026
• How to Lower Your Tax Bill Next Year
• 7 Bad Tax Habits to Kick Right Now

The 2026 tax filing season officially began on January 26, and it was already shaping up to be a challenging one for the IRS due to staffing and funding challenges.

But now, some wonder whether a looming government shutdown at the end of January could disrupt operations just as the season kicks off.

Last week, congressional leaders released a "minibus" spending package designed to avert a government shutdown on January 30.

The initially proposed bipartisan deal includes about $1.1 billion in reductions to the IRS’s base budget compared with FY 2025. Perhaps more significantly, it would claw back an additional $11.6 billion in supplemental funding originally intended for long‑term modernization at the tax agency.

But since then, as Kiplinger has reported, following the January 23 shooting of Alex Pretti by federal agents in Minneapolis, Senate Democrats have pledged to block the package because it includes funding for the Department of Homeland Security.

IRS funding is tied to this same legislative bundle, so the agency faces a risk of a funding lapse if lawmakers can't come to an agreement.

Meanwhile, the IRS, which reportedly lost nearly a quarter of its staff since the start of President Donald Trump's second term, has said that it expects to receive approximately 164 million individual income tax returns this filing season.

Last year, the agency received roughly 140.6 million individual returns.

So, it's fair to say that the IRS will have much to do this year, with fewer resources. And if a partial government shutdown occurs instead of this deal passing, the IRS could be forced to operate under even tighter emergency contingencies.

What does all of this mean for you and your taxes?

New proposed IRS budget cuts

The most recent proposed government funding agreement (now seemingly in limbo) signals a move toward a leaner IRS on top of already existing staffing shifts, cuts, and funding clawbacks.

Here is how the proposed budget for the current fiscal year (FY26) compares to last year:

IRS Budget Comparison FY25 vs FY 26

These proposed budget cuts follow a volatile year of internal restructuring.

About a year ago, in 2025, the Department of Governmental Efficiency (DOGE), then led by Elon Musk of Tesla, X (formerly Twitter), and SpaceX fame, began cutting IRS personnel, culminating in a 25% reduction in the tax agency's workforce.

Later, on July 4, 2025, President Donald Trump signed the so-called "big, beautiful bill" into law, which made sweeping changes to many tax provisions, including those that significantly impact individual filers.

IRS staff cuts could mean a long wait for help

For example, you might spend a long time on hold this tax season while waiting to speak with an IRS taxpayer assistance agent.

Following the IRS staffing cuts last year, a report from the Treasury Inspector General for Tax Administration (TIGTA) noted significant declines in staffing in taxpayer assistance functions and warned of potential impacts on service.

• The IRS reported having 20,692 taxpayer assistance employees.
• The IRS previously reported that more than 20,000 employees worked on taxpayer assistance, but TIGTA found that staffing has fallen since then, leaving fewer staff available for the 2026 filing season.
• TIGTA stated the IRS needs 3,500 additional personnel to reach an adequate staffing level.

The IRS is under a hiring freeze, so it can’t recruit new full-time permanent employees. It used its "direct-hire authority" to recruit temporary employees, but whether it hired enough people went largely unreported.

Additionally, according to Accounting Today, the IRS has closed 9 walk-in centers nationwide, including locations in California, Pennsylvania, and New York.

At the end of 2025, several Democratic senators called for an end to the hiring freeze. In a letter to Treasury Secretary/Acting IRS Commissioner Scott Bessent, Sens. Elizabeth Warren (D-Mass.), Bernie Sanders (I-Vt.) Cory Booker (D-N.J.), Raphael Warnock (D-Ga.), and others expressed concern about the impact of personnel cuts on IRS services.

While acknowledging " some isolated instances of hiring for internal positions", the senators wrote: "We are concerned that the recent personnel cuts…and the ongoing hiring freeze will greatly hinder these advocates' ability to provide quality, timely service to taxpayers who need help."

A bumpy ride with a new Schedule 1-A?

While it's unlikely that the 2026 filing season will be "smooth sailing," the IRS released guidance last fall on new deductions for tips, overtime pay, and car loan interest — all changes in the 2025 Trump tax bill. These new deductions will be claimed by eligible taxpayers on the brand-new Schedule 1-A (Form 1040).

In a January 8 news release, IRS CEO Frank Bisignano, who simultaneously leads the Social Security Administration (SSA), expressed confidence:

"The Internal Revenue Service is ready to help taxpayers meet their tax filing and payment obligations during the 2026 filing season. As always, the IRS workforce remains vigilant and dedicated to their mission to serve the American taxpaying public. At the same time, IRS information systems have been updated to incorporate the new tax laws and are ready to efficiently and effectively process taxpayer returns."'

Getting information about your return

One way to navigate the communications dilemma posed by IRS staffing cuts is to create an online IRS account. To do that, go to IRS.gov and follow the instructions. You’ll get access to your tax transcripts, account status, and digital notices.

However, the account’s functionality is limited. You can’t ask questions or get tax advice. So consult with a trusted tax professional if you have questions or concerns about your 2025 tax return.

Read More

• What's in the 2025 Trump Tax Bill?
• House GOP Predicts 'Average' $1,000 Tax Refund Payouts in 2026
• What Would a Government Shutdown Do to the IRS?
• Not Ready to File Taxes? 8 Things to Do Now to Prepare

You could be in for surprise taxes if you're planning for retirement in 2026. And we're not talking about common tax pitfalls, like taking required minimum distributions (RMDs) that force withdrawals from your individual retirement accounts (IRAs). (Though those certainly are important).

Several new federal policy changes could hike your retiree tax bill this year. For instance, under the 2025 Trump/GOP tax and spending bill, your "senior bonus" deduction may be lower than expected due to income phase-outs, indirectly resulting in an overall increase in Social Security benefit taxes.

For high-earning retirees still in the workforce, 2026 is the year the mandatory "Roth catch-up" mandate could arrive. Employers can start requiring you to contribute your catch-up contributions to a Roth account in this final year of implementation.

These three new retirement tax traps for retirees go beyond the basics, so let's look at how you might avoid them in 2026.

Related: Don't Overpay the IRS: 6 Tax Mistakes That Could Be Raising Your Bill

1. The SECURE 2.0 Roth catch-up contributions for 2026

About one-fifth of Americans 65 and older work, according to Pew Research, and if that's you, you'll want to watch out for the new high-earner Roth catch-up rules in 2026.

What's changed? Under federal tax law, if you're 50 or older, you can make catch-up contributions to your employer-sponsored retirement savings account (like a 401(k), IRA, etc.). However, starting this year, high earners may be subject to a "Roth mandate," which requires their catch-up contributions to be made to a Roth account, using after-tax funds.

The SECURE 2.0 "Roth mandate rule" won't be fully implemented until 2027, but employers must start complying as of January 1, 2026.

Here's who's affected by the new Roth rule on catch-up contributions:

• Workers (including retirees) who are 50 and older with a 401(k), 403(b), or governmental 457(b) plans, with
• Income of $150,000 or more from their current employer in the prior year.

Here's how to avoid the Roth mandate tax trap:

• Prepare for a smaller paycheck. With the shift to after-tax Roth catch-ups, that familiar pre-tax deduction may be gone on your year-end return. Plan now to adjust your 2026 household savings strategy.
• Watch for future Medicare premium spikes. Your adjusted gross income (AGI) might tick higher with after-tax Roth catch-ups compared to pre-tax contributions. Consider stopping catch-up contributions if the new rule applies to you, and look for investment options that don't affect AGI, like municipal bonds (though municipal bonds may impact your modified AGI calculation on Social Security benefits).
• Review your return for potential loss of tax benefits. Key 2026 benefits — like the new "senior bonus deduction" (more on that later) — have income phase-outs. Without the benefit of a pre-tax contribution, you might not get the highest tax benefit possible.

But while there are certainly some drawbacks, Roth contributions mean you can withdraw that money tax-free in retirement. That's why there are six reasons why you might convert your IRA to a Roth this year.

2. Social Security 'senior' tax deduction phase-outs in 2026

When the 2025 Trump tax bill was signed, there was initial confusion about whether federal taxes on Social Security benefits would be eliminated. While the Trump law didn't end the tax on Social Security benefits, a temporary new federal deduction was created, called the "senior bonus deduction."

What's changed? The idea was that the deduction would lower the amount of income subject to Social Security benefits tax by up to $6,000 per qualifying individual. The problem with this strategy is that not all retirees are eligible for the new bonus deduction.

For instance, single filers must make under $75,000 in modified adjusted gross income (MAGI) per year ($150,000 MAGI if married filing jointly). After that, the deduction begins to phase out.

Consequently, retirees who anticipated the senior bonus deduction lowering (or even "eliminating") their Social Security benefit taxes might end up with a higher tax bill if they aren't aware of the income phaseouts (and other eligibility requirements).

Here's what you can do to avoid this Social Security "senior bonus" tax trap:

• Avoid any extra withdrawals from an individual retirement account (IRA). If your household income is hovering just below the phase-out lines of the "senior bonus" deduction, hold off on withdrawing from an IRA that could wipe out the new tax break.
• Use a qualified charitable distribution (QCD). If you're at least 70 ½, you might use a QCD from an IRA to not only satisfy your RMD rules, but also to lower your AGI and keep yourself below the taxable thresholds for Social Security benefits and the bonus deduction.
• Review your investment strategy. Large taxable events, like Roth conversions or significant capital gains, should be strategically sequenced over time. Alternatively, if you can harvest capital losses to offset those gains, you can keep your income below the $6,000 bonus deduction phase-out limits (and maybe reduce taxation on Social Security benefits, too).

Despite the confusing Social Security Administration (SSA) email sent early last year, Social Security benefits remain federally taxable, up to 85%. Knowing the tax rules can help you avoid a surprise Social Security tax bill in retirement.

3. State tax conformity in 2026: Does your state follow the 'senior bonus' deduction?

States have the option to follow all, part, or none of the tax policy changes enacted in the 2025 Trump/GOP tax and spending bill. This is another opportunity for a potential "tax trap" on your state income tax bill at the end of the year (if you have one).

For instance, Virginia has temporarily halted automatic conformity with federal tax law, meaning residents will need to add back any 2025 Trump tax law changes to their state income returns during the 2026 filing season.

So if, say, a 70-year-old single filer who lives in Virginia has $55,000 in taxable income and qualifies for the "senior bonus" deduction:

• Federal taxes could allow a $6,000 "senior bonus" deduction, resulting in $49,000 federal taxable income.
• However, Virginia state income tax would add back that $6,000 deduction, resulting in $55,000 state taxable income.

*Note: This is a simplified example to demonstrate the difference between conformity vs. nonconformity tax rules. Actual federal and state tax positions may differ.

What's changed? While nonconformity with federal tax policy isn't a new development, more states are choosing not to adopt all the 2025 Trump tax law changes due to state budgetary concerns. Consequently, managing two different financial identities — one for federal, one for state — may be a more prevalent concept for many retirees in 2026.

Here are a few steps you can take to mitigate the state conformity tax trap:

• Working retirees should verify their state withholding. Don't let your employer's payroll system only account for federal withholding. Manually increase your state-level withholding (if necessary) or increase your quarterly estimated withholding (if you pay income taxes via that method).
• Use the health savings account (HSA) "Bronze Switch." The Trump/GOP tax bill expanded HSA eligibility to include Bronze health plans beginning this year. That means if your state has high income taxes but follows federal HSA rules (most states do), consider maximizing your HSA contributions to help lower your AGI for both federal and state purposes.
• Review if your state is adopting the federal "senior bonus" deduction. If your state doesn't allow the senior bonus, scale back any large taxable events. For instance, if you plan on converting an IRA to a Roth this year, convert up to the amount where your state tax bill remains manageable.

There may be other tax pitfalls as states continue to weigh in on whether to conform to federal tax law changes. Consult with a qualified tax professional if you have questions about your financial position.

Read More

• An HSA Sounds Great for Taxes, But It Might Not Be Right for You
• When to Hire a Tax Pro: The Age Most Americans Switch to a CPA
• Social Security Tax Limit for 2026: What the Higher Cap Means for Your Paycheck

If you were counting on filing your 2025 taxes directly with the IRS for free, you’ll have to change your plans.

That's because IRS Direct File, a program launched two tax seasons ago, was ended by the U.S. Treasury Department late last year despite the U.S. Government Accountability Office (GAO) and a majority of taxpayers who utilized the service hailing the two-year pilot program a success.

According to a report to Congress, the Treasury Department said that Direct File had a low participation rate (fewer than 0.5% of the 146 million tax returns filed in 2025). The Treasury also pointed to the program’s cost (about $138 per return through Direct File) as being relatively high compared to other IRS free tax filing options.

So, the Treasury and IRS eliminated Direct File and it is not available for the 2026 filing season. But thankfully, some other free tax filing options are alive and well. Here's more to know.

Does Direct File Still Exist? Can you still file directly with the IRS for free in 2026?

The Treasury Department report issued last November on IRS Direct File concluded that the tax agency should focus on other priorities, like enhancing and expanding its longstanding Free File program.

As Kiplinger has reported, Direct File has been a lightning rod for controversy since its pilot launch during the Biden administration.

• The program came about after the IRS found that 70% of taxpayers surveyed expressed interest in a free IRS-provided tool for preparing and filing taxes.
• At the time, IRS data revealed that people spent an average of about $250 to prepare their taxes.
• The IRS-run tax prep and filing service was supposed to be available to a wider range of taxpayers with generally uncomplicated returns and incomes up to around $200,000.

The IRS initially touted the program as easy or easier to use than traditional tax prep software, while still being electronic and free.

Still, tax preparation companies, including H&R Block and Intuit TurboTax, opposed the IRS getting into the tax preparation business and lobbied against the idea for years.

And, the Republican-led U.S. House Ways and Means Committee, which has oversight over the IRS, has argued that the IRS lacked explicit congressional authorization to make the Direct File program permanent.

So, Direct File is not available for the 2026 tax filing season. (This change primarily affects taxpayers with simple returns who were eligible for Direct File.)

But…despite the end of the program, the tax agency still offers other longstanding free file options for some taxpayers.

How to file your taxes for free with the IRS in

Launched more than 20 years ago, IRS Free File allows eligible taxpayers to use guided software to file their tax returns with IRS "trusted tax prep service partners" at no charge.

Taxpayers whose adjusted gross incomes (AGI) are $89,000 or less are eligible to use Free File.

Note: You can browse the IRS’s eight trusted partners for the 2026 season on the IRS Free File website. However, partner Free File portals can only be accessed from the IRS website. If you go directly to a partner’s general commercial website, you won't see the Free File portal.

Also, be attentive to the partners’ Free File eligibility rules, as those vary:

• Some have age restrictions.
• Several partners have income floor and ceiling limits.
• Some limit free filing availability to taxpayers with relatively simple returns. That means returns with schedules, like those for itemized deductions, for example, might not be accepted.

If you meet the criteria for filing a free federal return through IRS Free File, state filing availability depends on which Free File partner you choose.

IRS Free File opened on January 9 and will run through October 15, 2026.

Does the IRS use Free Fillable Forms?

There's another way to file your federal income tax return for free with the IRS.

• If your AGI is higher than $89,000, you can file your tax return using the IRS’s Free Fillable Forms.
• Unlike IRS Free File, however, Free Fillable Forms doesn’t use guided software.
• So, only choose this option if you are comfortable preparing your own tax return.

IRS Free Fillable Forms opens on January 26 (the official IRS 2026 tax season start date for accepting returns) and will run through October 15.

Can military file taxes for free?

People who serve often wonder if there are free tax-filing apps specifically for the military.

MilTax is a feature of MilitaryOneSource, a program funded by the U.S. Department of Defense (DOD) that provides various services, including tax services, to members of the military, their spouses and dependents, survivors, and some veterans.

• MilTax provides free online tax prep and filing software and trained personalized support tailored to military-specific tax circumstances.
• You can file up to three state returns along with your federal return.
• You can find out if you’re eligible to file with MilTax by visiting the MilitaryOneSource website.

Note: Intuit TurboTax offers free federal and state tax filing for eligible active-duty and reserve enlisted members. TaxSlayer also offers free federal filing for eligible active-duty members, but state filing incurs an extra cost.

MilTax will begin accepting tax returns on January 15 and through October 15, 2026.

Free in-person tax preparation and assistance

Volunteer Income Tax Assistance (VITA): VITA is a longstanding IRS public-private partnership providing free tax preparation services to low- and moderate-income taxpayers.

Principally staffed by volunteers, VITA operates out of community centers, schools, libraries, churches, and similar facilities. VITA serves taxpayers with incomes of $67,000 or less, those with disabilities, and taxpayers whose English-speaking skills are limited.

Find out more about VITA, including VITA locations, by visiting the IRS website or by calling 800-906-9887.

VITA sites post their own schedules, but most open in late January and run through April 15, 2026.

Tax Counseling for the Elderly (TCE): TCE is also a longstanding public-private partnership between the IRS and the AARP Foundation’s Tax-Aide program, providing free tax help particularly to those aged 60 or older. TCE volunteers specialize in questions about pensions and other retirement-related issues pertaining to seniors.

TCE services are available from February 1 through April 15. You can find the nearest TCE provider using the AARP site locator tool or by calling 888-227-7669.

Free tax filing 2026: Bottom line

In addition to the options mentioned above, some private tax software companies also offer free filing options for simple returns.

However, keep in mind that these offers may be limited, for example, in that state returns or additional forms could potentially trigger extra charges.

So review the "fine print" of what’s included in a free-file option before you start filing your return.

This 2026 tax filing season also brings significant changes due to the sweeping 2025 Trump/GOP tax bill enacted last summer.

New tax deductions and tax rule changes make it more important than ever that you seek professional tax advice if needed, so that you can prepare an accurate return and claim all the tax breaks you're eligible for.

Read More

• What's the 2025 Standard Deduction?
• Not Ready to File Taxes? 8 Things to Do Now to Prepare
• Who is Required to File a Tax Return?

For millions of Americans, the start of the year brings one urgent question: "When will I get my W-2?"

While the legal mailing deadline for employers is typically January 31, that date falls on a Saturday in 2026. Consequently, the official IRS deadline for W-2 access has shifted to Monday, February 2, 2026.

Beyond the calendar, the 2026 tax filing landscape has transformed. The IRS is entering this season with a 26% reduction in staff, causing uncertainty about taxpayer support and whether tax refunds will be delayed.

Furthermore, this year marks the first full filing season under the 2025 Trump/GOP tax and spending bill, often referred to by President Donald Trump as the "big beautiful bill" (BBB). As W-2s arrive, taxpayers may be anxiously wondering if the promised "pay bump" from the Trump administration will materialize in a 2026 tax refund.

We'll break down the 2026 W-2 delivery timeline, how the latest legislative tax changes may impact your filing, and what to do if your W-2 forms are late or missing.

Read on.

W-2 deadline 2026: Key dates to know

When will the W-2 be released in 2026?

The IRS W-2 arrival date for 2026 is February 2. Your IRS Form W-2 is an essential tax document for return filing, capturing every dollar earned and every cent of federal, state, and local taxes withheld from your paychecks throughout the year.

The legal deadline for employers to furnish the W-2 is January 31st.

But since that date falls on a weekend this year, you might experience a slight arrival delay, particularly if your W-2 is sent through the mail. Yet many employers often distribute W-2s well in advance of the deadline.

W-2 release date and schedule for 2026

Your W-2 arrival date depends largely on your delivery preference: digital access or postal mail. However, the following schedule provides an estimate for when your W-2 may be ready for the 2026 tax season.

*Note: This table is based on IRS deadlines and historical trends. Some projections and delivery times may vary.

2026 tax changes: How the Trump tax bill impacts tips, overtime, and more

For the 2026 tax season (your 2025 income tax return), employers are not required to separately report tips or overtime from your wages on your W-2. Yet that doesn't mean you can't still claim the "no tax on tips" deduction or the deduction for overtime pay when you file (if you're eligible).

The so-called BBB created several new temporary tax breaks that you might be eligible to receive this year when filing your federal income tax return, including:

• The car loan interest deduction, worth up to $10,000 on new, qualifying vehicles.
• The "senior bonus deduction," worth up to $6,000 for taxpayers 65 and older who meet certain eligibility requirements.

What should you do? The IRS advises reviewing the 2025 Trump/GOP tax and spending bill for any new deductions you may qualify for this year (you can also do this by going to a trusted tax professional). It's also a good time to update your 2026 Form W-4 (if you haven't already) to ensure your withholding accurately reflects these legislative changes.

For more information on what a Form W-4 is and how to update it, check out Kiplinger's report, Things Every Worker Needs to Know About the W-4.

IRS staffing cuts: Will your 2026 tax refund be delayed?

Last year was an unprecedented year for the IRS. The Trump administration cut roughly 26% of the tax agency's workforce — amounting to approximately 26,000 employees. When paired with high IRS leadership turnover, these reductions have led many to speculate that the 2026 filing season will be understaffed and consequently lead to tax refund delays.

According to a recent report from the National Taxpayer Advocate (NTA), filers may need to prepare for:

• Extensive call wait times. Reaching a human representative may be more difficult than in previous years.
• Refund processing lags. Manual reviews for complex BBB claims might take longer to process.
• Identity theft backlogs. Resolution times for fraud-related cases are projected to increase.

Related: 3 IRS Problems That Needed to be Addressed Before the 2026 Filing Season.

However, current IRS leadership maintains a confident posture for success. Frank Bisignano, Commissioner of the Social Security Administration and also appointed in October as the first-ever IRS Chief Executive Officer, recently stated in a press release that IRS information systems have been successfully updated for the new tax laws and that the IRS "is ready to help taxpayers meet their filing and payment obligations during the 2026 filing season."

U.S. Treasury Secretary and Acting IRS Commissioner Scott Bessent also expressed confidence in the "ability to deliver results and drive growth for businesses and consumers alike," in the release.

Regardless of the debate, the IRS has cautioned taxpayers to prepare early this filing season by reviewing tax law changes, gathering all pertinent tax records, and verifying direct deposit information as the federal agency phases out paper checks this year.

See also: IRS Phases Out Paper Checks: What Happens Next?

2026 W-2 FAQs

Why is my 2026 W-2 delayed?

Is your W-2 form late? Certain factors can affect the timing of your W-2 delivery, including:

• Incorrect employee information. If an employee's name, address, or Social Security Number (SSN) is incorrectly stated on a W-2, the form may be marked "undeliverable" by the IRS or rejected during processing.
• Mailing and delivery issues. The postmark date for W-2s in 2026 is January 31, which falls on a weekend. Because of this, W-2s may still be in transit in early February. Alternatively, the form could be lost in the mail or returned if the address was incorrect.
• Employer errors (or omissions). Employer-related mistakes, like using light-colored ink or excluding certain information on the W-2, could ultimately delay the distribution of the form.

To mitigate the effects of W-2 delays, review the information on file with your human resources processor (or employer) to ensure that your W-2 information is accurate and up to date.

What if I haven't received my W-2?

What to do if your W-2 is not received by February 2. It's normal for a W-2 not to arrive exactly on the deadline date; though if you don't receive your W-2 by mid-February, that could indicate a problem. Here's what you can do:

• Contact your employer first. Reach out to your human resources or payroll department to verify that the W-2 was mailed out (or made electronically available to you).
• Contact the IRS directly. If contacting your employer doesn't resolve the issue and/or you still haven't received your W-2 by the end of February, you can contact the IRS for assistance by calling 1-800-829-1040.
• File Form 4852, Request for Substitute for Form W-2, Wage and Tax Statement. If the tax filing deadline is approaching and you haven't been able to receive your W-2, you may use your final pay stub to estimate wages and withheld taxes while filing Form 4852. However, this is a last resort option.

Can I file my 2026 taxes with a paystub?

No. Although it may seem tempting to use your last paystub to file income taxes while waiting for your W-2, paychecks often lack the specific information state and federal agencies need for income tax filing.

Some filers use their final pay stub when their employer or former employer refuses to send a Form W-2. In that case, taxpayers can use their last paystub in conjunction with Form 4852 as a last resort (but only after contacting the IRS).

When is the 2026 tax deadline? Federal and state dates

Federal income tax returns are due Wednesday, April 15, 2026. So even if your W-2 is late, you'll still have until mid-April to file your federal income taxes.

Your state return (if you have one) is typically due on or around the federal deadline (though some states have an earlier due date for returns).

Alternatively, if you were in a federally declared disaster area in 2025, you might have more time to file and pay your income taxes. Check your state Department of Revenue or Taxation website or IRS disaster relief page for more information on when your income taxes may be due for 2026.

Read More

• 2025-2026 Tax Brackets and Federal Income Tax Rates
• What's the Standard Deduction? Key Changes and Updated Amounts
• GOP House Predicts $1,000 Tax Refund Payouts in 2026

If the thought of tax season coming and possibly undergoing an IRS audit fills you with anxiety, you’re not alone.

As the late Sen. Orrin Hatch once said, “The Internal Revenue Service is the most feared federal agency in the country.”

The fact is that audit anxiety is real.

According to the American Psychological Association and Psychology Today, audit anxiety is a situational manifestation of anticipatory anxiety. That's a visceral reaction marked by an acute sense of worry and concern over potential findings and possible adverse consequences, even if you’ve done nothing wrong.

Many taxpayers fear being audited by the IRS, even though data show that the chances of an individual taxpayer being audited are relatively slim for most. Still, if you’re worried, read on for some tips on how to cope.

What’s so scary about being audited by the IRS?

There are several reasons that people might fear an IRS audit, but a big one is that the U.S. tax code is notoriously complex and difficult to understand. Tax forms are only marginally less so.

It’s easy to make mistakes, whether in understanding the law or completing your income tax return.

Other factors that can inspire audit anxiety include:

• Fear of owing money to the IRS and concern over whether back taxes, penalties, or interest will put a strain on finances
• The idea of government officials combing through personal records
• The stigma of being judged as dishonest or careless
• Prior audits or hearing about others’ negative experiences
• Lack of professional guidance

And then, there’s perhaps the biggest reason of all: Some tax returns that are audited by the IRS are chosen at random — simply the luck of the draw.

Ways to beat audit anxiety

While it may be impossible to eliminate the chances of being audited, there are some things taxpayers can do to lessen audit risk.

1. File an accurate return. The IRS devotes several technical resources to finding inaccuracies in returns. These computer systems rank returns for:

• the potential for error using a secret IRS formula
• the potential of having unreported income
• by comparing the information you reported to the information provided by third parties to see if everything matches up.

The IRS also uses AI and data analytics to detect discrepancies.

In addition to calculations, filing an accurate return includes properly reporting marital or dependent status and proper income reporting from more than one source.

2. Stay organized year-round. Create a filing system and keep receipts, invoices, and documents for deductions and credits in one place.

3. Know the red flags for an IRS audit. These include, among others, large charitable deductions and home office deduction claims. This is not to say you shouldn’t claim these if you’re eligible for them, but you should make sure you have the documentation to back them up.

4. File on time. Late filing will mark your return for IRS enforcement, making it more likely to be audited.

5. Consult a tax professional. If you have a complex return, using a tax professional can ease anxiety and ensure compliance.

6. File your return electronically. E-filing can help reduce math errors and ensure faster processing. For an extra fee, some tax preparation software companies offer representation in case your return is chosen for audit.

7. Don’t chase large refunds. Don’t cheat and claim deductions or expenses you didn’t have. This is a tactic the IRS is well aware of. You may escape audit for a particular filing season. But if you do it consistently and are audited once, the IRS can pull your returns for an indefinite period for audit. In other words, the IRS’s normal 3-year window for auditing returns never closes.

8. Maintain perspective. In 2024, the IRS reportedly performed 505,514 audits across all return types. That’s an audit rate of about 0.05% or about 1 in 200 returns.

Data generally show that high-income taxpayers and low-income taxpayers are the most likely to be audited. The middle class has been the least likely to be audited: the IRS Data Book shows that, as of 2022, middle-income taxpayers were subject to an audit rate of 0.01%.

Read More

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• IRS Says You Made a Tax Return Mistake? A New Law Could Help You Fight Back
• What Are Your Chances of an IRS Audit? 15 Audit Red Flags
• Could Vibe Coding Put Your Retirement Portfolio at Risk?

The charitable giving landscape is set for its most significant tax overhaul in a decade. Starting this year, new federal tax rules — enacted via the big GOP/Trump tax and spending bill — change how nearly every American taxpayer can deduct contributions on federal returns.

For instance, a new tax break allows those who claim the 2026 standard deduction to deduct charitable giving donations. At the same time, new rules limit how the itemized charitable deduction reduces taxes for high earners.

Here are three big ways the charitable deduction has changed for individual taxpayers in 2026, and what these new rules might mean for you.

Note: This article pertains to federal income taxes only. State income returns may differ.

1. New $1,000 standard deduction charity break in 2026

Do you typically claim the standard deduction on your federal taxes? You're in luck. Beginning in tax year 2026, there's a new deduction you could take.

The non-itemizer charitable deduction is available for all taxpayers claiming the standard deduction, worth up to $1,000 ($2,000 for joint filers).

Here are a few fast facts on this key tax break:

• Only cash contributions qualify (checks, credit card charges, online donations and payroll deductions).
• The donation must be made to a qualified 501(c)(3) public charity.
• You must follow the typical IRS rules for a charitable deduction, including obtaining a written acknowledgement if you donate $250 or more.

Unlike the itemized charitable deduction, any contributions exceeding the annual limit for the non-itemized deduction cannot be carried forward. You also can’t use the deduction in conjunction with a donor-advised fund (DAF) or private foundation, as you can for itemized charitable contributions.

Despite these limitations, some predict that 144 million Americans will be eligible to claim the standard deduction charitable tax break during the 2027 filing season.

A similar (though temporary) policy took place during the COVID-19 pandemic, which allowed a $300 charity deduction for individual non-itemizers. Almost 30% of standard deduction filers took advantage of the tax break, "indicating that the One Big Beautiful Bill (OBBB) even larger deduction could be popular," per the Tax Foundation.

2. 2026 charitable deduction: The 0.5% AGI floor

One of the most significant changes in the 2025 Trump tax bill is the introduction of a "floor" for itemized deductions. Starting in 2026, you can only deduct charitable gifts that exceed 0.5% of your adjusted gross income (AGI).

This significant change effectively eliminates the tax benefit of smaller, routine donations.

For example, if you have a $200,000 AGI and donated $2,000 over the year:

• Your AGI floor is $1,000.
• Only $1,000 of your donation would be deductible.

The change might push more high-income donors toward "bunching" their contributions — making one large gift every few years — to clear the AGI floor and maximize their deductions.

Alternatively, taxpayers age 70½ or older might choose to make more qualified charitable distributions (QCDs), which the 0.5% AGI floor rule does not affect.

For more information on charitable contribution strategies, check out Kiplinger's report: How High Earners Can Maximize Their Charitable Contribution Donations.

3. The new 35% deduction cap for high-income donors in 2026

Charitable contributions for high-income itemizers are subject to a deduction cap in 2026. The new law imposes a 35% limit on the value of all itemized deductions for those in the highest income bracket.

This means top-bracket taxpayers (currently 37%) receive a lower effective tax break compared to last year.

For example, if you have a $2,000 deductible donation as a top federal-bracket earner:

• You could only get $700 in tax savings for 2026.
• In the prior tax year, that same donation resulted in $740 of savings.

Combined, the AGI floor and the charitable deduction cap are expected to lower the tax benefit for donating to charities for high-income earners in 2026.

2026 charitable deduction example: Calculating your new tax benefit

The table outlines how a top tax-bracket donor with an AGI of $1,000,000 with $400,000 in donations could receive a lower tax benefit in 2026 vs the 2025 rules.

Note: The "total potential tax benefit amount" does not reflect further AGI limits applied or other tax liability limitations applicable to high-income earners.

Important context for carryforwards: While excess contributions can still be carried forward for up to five years, any carryforwards used in 2026 and beyond are subject to the new limitations. As a result, a generous 2025 gift carried into 2026 could unexpectedly result in a smaller tax benefit than originally planned.

Summary of the OBBB changes to 2026 charitable tax rules

The 2025 Trump Tax Bill changed many rules regarding charitable donations. Those changes are summarized in the table.

The changes might not affect everyone, depending on your gifting strategy. Consult with a qualified tax professional to discuss which tax strategies are best for your financial circumstances.

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Tax scams, unfortunately, happen year-round, but they surge during the holiday season.

Scammers know that people are busy with year-end distractions like shopping, traveling, not to mention the approach of the tax filing season. They're counting on the season's stresses to catch people off guard.

It doesn't help that scams have become more sophisticated, especially those that use AI-generated fake websites, emails and texts that are convincing to the undiscerning and sometimes, even the discerning eye.

The IRS is warning: Email addresses might be spoofed, communications might contain realistic-looking case numbers, and caller-ID masking on phone calls can fool many.

Even worse? Phone scams are sometimes carried out using deepfake AI voice software, where the voice generated sounds indistinguishable from a real person.

To help protect yourself, watch out for three of the most common holiday tax scams.

Gift card scams

During the holiday season, requests for gift cards are common. Gift card scams might involve a fraudster contacting a taxpayer via email, text or via social media, posing as an IRS official.

The scammer might:

• Demand immediate payment to resolve a fake tax liability
• Call or leave a voicemail informing the victim they're linked to criminal activity
• Harass a taxpayer into paying a fictitious tax or penalty under threat of arrest or deportation

Victims are told to purchase gift cards to satisfy the amounts supposedly "owed." The scammer then instruct the taxpayer to provide the gift card number or numbers and PIN.

To protect yourself, remember the IRS will never demand immediate payment of taxes by gift card. The federal tax agency will mail an official letter, including a statement of tax liability, to those who owe taxes.

Fake charities and charity tie-in scams

When it comes to charities, scammers pretend to be or to represent legitimate nonprofits such as the Red Cross or Salvation Army, pressuring would-be donors to give quickly.

If the donor, for example, "acts before Christmas," the scammer usually promises that the donation will lead to special tax deductions resulting in larger refunds, or "holiday credits." If the donor gives, the money never reaches the charity; it goes into the scammer's pocket.

To avoid being taken advantage of, potential donors should:

• Ask the fundraiser for the charity's exact name, website and mailing address to independently confirm the information. Then use the IRS' Tax-Exempt Organization Search tool (TEOS) to verify if an organization is a legitimate tax-exempt charity.
• Resist being pressured. There's no need to rush. Legitimate charities are happy to get a donation at any time.
• Never give more than what is needed. Treat your personal information like cash and hold it close.
• If payment is requested in any form other than check or credit card, it's a scam. Never work with a charity that requests charitable donations via gift card, peer-to-peer apps, cryptocurrency or wire transfer.
• Never pay unless or until you have verified that the charity is legitimate, and even then, you should initiate contact with the charity.

Phishing and smishing scams

With the use of generative AI, the credibility of emails, texts and websites is greater than ever before.

• As Kiplinger has reported, in a phishing scam, fraudsters send an email to trick people into revealing sensitive or personal information.
• Smishing serves the same purpose, except the scammer sends the message via text.
• Scammers impersonate tax authorities to steal personal and financial data. Sometimes they demand money, but not always.

Don't click on links or attachments. That can compromise your computer or phone by installing malware that searches for personal and financial data on your computer's hard drive.

If you’re unsure, call the phone number posted on the IRS website to verify.

Tax scams: Bottom line

Unfortunately, scammers are a scourge we must live with, be it during the holidays or any time.

The best defense we have is to stay vigilant by keeping up our electronic security protocols, staying informed about events that might affect us, and reporting any scam we encounter to the IRS.

Read More:

• Retirees Face Significant Tax Bills Due to Fraud
• AI Tax Scams Target Middle and Older Adults: What to Know
• How Charitable Donations Can Reduce Your Taxes

Estate tax planning may be key for many retirees, yet it's anything but easy. Between the complexities of federal estate rules and the patchwork of states imposing their own inheritance and estate taxes, the colloquially named "death tax" continues to haunt wealth transfer strategies to this day.

But if you can master the IRS rules governing estate taxes, you may find powerful ways to save more money for your heirs. Use this quiz to test your knowledge of 2026 federal estate tax rules, with a bonus question at the end on estate taxes for states.

(Remember, always consult with a qualified tax professional or estate attorney when making final planning decisions.)

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Gambling winnings are expected to be taxed more next year — at least federally. Thanks to the 2025 GOP/Trump tax and spending bill, a portion of winnings from activities like lotteries, slot machines, and sports betting face a potential double taxation.

That's because prior IRS gambling rules allowed you to deduct all gambling losses up to the amount of winnings. Starting in 2026, losses are limited to 90% of winnings.

But just weeks before the new gambling tax provision becomes effective, President Donald Trump reportedly said he would "think about" repealing income taxes on gambling winnings entirely.

Here's more of what to know.

Trump gambling tax: Is it coming to an end?

When reporters asked President Trump in early December if he would consider eliminating federal taxes on gambling winnings, he remarked, "No tax on gambling winnings, I don't know. I'm gonna have to think about that."

This suggestion stands in stark contrast to the effects of the major legislative Republican tax bill enacted in July. Starting January 1, 2026, the new GOP law will impose a tax cap, limiting gambling loss deductions to 90% of winnings (down from 100%) — a provision that may hike the tax bill for many gamblers.

For example, if you pay $100 for state scratch-offs and win $100, you could owe the government $10 on your "winnings" in 2026.

Gaming industry leaders and stakeholders, including the American Gaming Association, have referred to this new tax scenario as "phantom income." This term is used because the new cap forces gamblers to pay taxes on losses — a rule the AGA argues is "uniquely penalizing" gambling compared to other businesses.

And the new gambling tax provision is expected to generate a significant amount of phantom income.

According to the Joint Committee on Taxation, taxing Americans on 10% of their gambling losses could generate over $1.1 billion over the next decade.

While most of those earnings are expected to come from high-wealth, professional gamblers, any taxpayer who itemizes their gambling losses could be subject to paying more tax due to the new IRS gambling rule in 2026.

IRS audit triggers and gambling taxes

In recent years, the IRS has ramped up its investigative work on gambling winnings.

Under the Biden administration, the agency began enforcement efforts with taxpayers whose income was $100,000 or more, vowing to take a closer look at sports betting and online gambling in particular.

Since then, overall IRS audits have decreased under the Trump administration, particularly for high-income taxpayers. Yet the IRS still views nearly all recreational and professional gambling as taxable income.

As such, here are some types of gambling income that could be subject to an IRS audit:

• Lotteries and raffles, including state lotteries, scratch-off cards, charity drawings, etc.
• Sports betting (either online sports bets or in-person betting, and even office pools like the NFL playoffs or the Super Bowl).
• Online gambling, including casinos, poker, and fantasy sports bets.
• Horse races, dog races, and other racing activities.
• Sweepstakes, contests, and game shows.

Whether a casual gambler or a professional, all gambling winnings are always subject to federal income taxes. Losses are deductible on Schedule A of Form 1040, up to 90% of the amount of gambling winnings for tax year 2026 (100% for tax year 2025). To claim the deduction, you must keep detailed tax records of your wagers (e.g., tickets, receipts, forms, etc.).

Tip: Also check with your state and/or local jurisdictions for how more localized taxes apply. Gambling is not legal in all states.

'Big beautiful bill' gambling tax changes backlash

As Kiplinger has reported, the new gambling winning tax provision in the new Trump tax law has faced considerable backlash from industry giants and government officials.

Jason Robbins, CEO of DraftKings (popular sports betting platform), remarked in an interview with CNBC, "If you can't deduct all your losses, you know, how does that make sense that you pay income tax on something that's not actually income."

Rep. Jason Smith (R-MO), Chairman of the House Ways and Means Committee and advocate of the new 2025 Trump tax law, called the provision a "mistake" and added that he was committed to working on a fix.

In the meantime, there have been proposals to repeal the new gambling tax law. For instance, the Fair Accounting for Income Realized from Betting Earnings Taxation (FAIR BET), proposed by Rep. Dina Titus (D-Nev), would revert the 90% gambling winnings loss deduction to 100% of gambling winnings.

Titus has been a lead critic against the new gambling winnings provision, citing negative economic impacts on Nevada and other "gaming-dependent" states.

Still other bipartisan bills have been introduced in Congress to repeal or modify the gambling tax provision, though all have stalled in committees and have not yet received votes in either the Senate or the House. Ongoing pressure from lawmakers and, now, the President, may help bolster a bipartisan deal or amendment in the new year.

Stay tuned for updates.

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Anyone who’s a fan of holiday movies is no doubt familiar with Charles Dickens' "A Christmas Carol."

The story is about how Ebenezer Scrooge, a miserly old man who swims through hoards of gold coins in some retellings, is transformed into a generous soul after he receives a visit from four spirits on Christmas Eve.

While most of us probably hope we’re not as frugal as Scrooge, we still enjoy a good deal when we see one. That’s why his dramatic change of heart holds a critical tax lesson: The most powerful way to lower your tax bill this season may be to give.

By employing this "Scrooge Strategy," you can donate gifts, clothes, and other old "junk" to squeeze out one last tax break before December 31. It might not be mounds of gold, but hey — every bit helps, right?

This article covers the federal income tax deduction. States may offer some variation of the charitable contribution deduction, if any. See your state's Department of Revenue or Taxation website for more information.

Charitable donations for the 'Scrooge' strategy

We all have those items piling in the back of our closets waiting to be used. So why not donate them?

Not only will you be helping someone in need, but you may be able to claim the charitable donation deduction on your 2025 federal income return if you itemize (rather than claim the standard deduction).

Yet before we dive into the types of donated goods that qualify for a potential tax break, we’ll first need to lay out some ground rules. Namely, the IRS rules on the eligibility of donated goods employing the "Scrooge" strategy.

1. The item must be donated to a qualified tax-exempt 501(c)3 organization (e.g., Goodwill, Toys for Tots, churches, etc.). You can verify an organization’s tax-exempt status via the IRS Tax Exempt Organization Search tool.
   
2. Donated goods must be in "good used condition" or better to be deductible. Nothing of poor quality will be accepted as a tax deduction (unless you can prove your item is worth more than $500 by a qualified appraiser).
   
3. The deductible amount of your donated goods is equal to the fair market value (FMV) at the time of donation, not what you originally paid. This means that if you’re donating to a thrift or consignment shop (like Goodwill), it’ll be for the amount they can sell the item.

You should keep detailed tax records of your donated goods. For example, if you donate $100 worth of old mugs to the Salvation Army, you'll at least want a description of the items, their value, and how that value was determined.

Written acknowledgement is a requirement for any non-cash goods donated that are worth $250 or more. You can often get this written notice by asking the organization you donated to for proof of donation.

Lastly, any one item or group of items worth over $5,000 must be appraised by a qualified appraiser to confirm their value (though most of us likely don’t have $5K lying around our closets, do we?).

Note: Collectibles, fine art, and other items that are valued over $5,000 may only be deducted based on FMV if the charity uses the item in a related way. So, for example, if you donate a painting to a museum that uses the art on display, that could be deductible at FMV. Otherwise, your deduction may be limited to your original cost basis in the item.

Charitable deduction deadline checklist

Just as Scrooge awoke on Christmas, relieved it was not too late to change his miserly ways, you also have time to make a non-cash contribution to charity before year-end. But you'd better hurry. The deadline to contribute for the 2025 tax year is December 31.

Here's a checklist of items you may find in your attic or closet that could count toward the federal charitable tax deduction:

While individually the items may not be worth much, the total value of your donated goods could quickly add up. And if you’re on the cusp of claiming the itemized or the standard deduction for the 2025 tax year, any extra donated goods could push you to itemize for a higher tax break. This could be particularly important given that new charitable deduction rules next year will further limit non-cash charity deductions.

Starting in 2026, all itemizers will be subject to a new deduction floor of .5% of their adjusted gross income (AGI). Any charitable contributions (including non-cash) below this threshold will be non-deductible.

Note: Appreciated stock, real estate, and other items that are typically not stored in the back of a closet or attic were excluded from this list. However, consult with a qualified tax professional before making a high-value donation, as different rules and tax planning considerations may apply.

Tax deduction for a charitable donation

Although we covered eligibility rules and examples of what could qualify for a charitable contribution tax break, some additional IRS guidelines limit how much you can claim on your federal income return for your non-cash charity deduction.

• Ordinary property held less than a year (like clothing, household items, etc.) is limited to your cost basis and 50% of your AGI.
• Appreciated long-term capital gain property (like artwork, jewelry, etc.) is limited to FMV and 30% of your AGI.
• If you donate long-term property to a private foundation, that’s generally limited to cost basis and 20% of your AGI.

However, there may be a silver lining: If your donation exceeds your AGI for the tax year, the leftover amounts may be carried over into the future, up to five tax years. So if you plan to itemize again, your non-cash contributions could qualify on next year’s return — but even if they don't, your charitable intentions will surely be appreciated by the charity of your choice.

Read More

• How Charitable Donations Can Reduce Your Taxes
• 3 Ways High-Income Earners Can Maximize Their Charitable Donations
• The Gift Tax Exclusion for 2025 and 2026 Is Here
• What Is a Qualified Charitable Distribution (QCD)?

For most of us, the only time we want to see an envelope from the IRS is if it contains a tax refund check. So when we see an envelope from the federal tax agency that doesn’t contain money, we get nervous.

Wondering what we did wrong, we tear open the envelope. We pull out a short, cryptic letter that says the IRS had discovered a math error on our return. The letter states that the IRS has corrected the mistake, increasing our tax liability.

That might be a relief if the amount of money involved is nominal, but what if we think the IRS is wrong? How do we fight them? The letter contains no contact information. And nothing in the letter says whether there’s a deadline for us to protest.

Well, new bipartisan legislation, recently signed into law by President Donald Trump, known as "The Math Act," is set to change the dreaded “math error” IRS notification system.

The changes, which will become effective in late 2026, are supposed to help taxpayers better understand their often minor tax return errors and, importantly, their taxpayer rights when dealing with the IRS.

Here’s more of what you need to know.

IRS math error notices sent to millions each year

Millions of people receive “math error” notices from the IRS every year. These notices are meant to handle simple errors that result in a tax deficiency more easily and streamlined than through more formal means, like a notice of deficiency.

The shortcut, however, is only meant for obvious mistakes, like miscalculations, missing required return schedules, or mismatched entries between forms.

The problem is that these notices are often vague and confusing. They often do a poor job of telling taxpayers the IRS’s exact reasons for the adjustments to their returns.

• Sometimes the notice might list several possible sources of error rather than specifying the exact issue.
• Not only that, the letters often fail to tell taxpayers that, by law, they have 60 days to protest an adjustment with the agency before it becomes final.

So, a taxpayer who might want to file an objection may never get the chance.

"For too long, the IRS has caused headaches and confusion when a taxpayer makes a fixable mistake on their taxes, providing no explanation as to why a refund is different than expected, or how to correct an error," said Rep. Randy Feenstra (R-Iowa) in a release about the new legislation.

IRS Math Act to the rescue: Key provisions

Enter the Math Act. In early December, President Trump signed the IRS Math and Taxpayer Help Act, requiring the IRS, in cases of mathematical errors, to provide detailed information notices when the error correction results in increased tax liability.

Specifically, the new law says the IRS must:

• Describe the error in plain language, including the type of error, the applicable Internal Revenue Code section, and the specific line of the tax return where the error occurs
• Show a detailed computation of how the IRS’s proposed adjustment affects the applicable return section
• Include the IRS automated hotline for requesting account transcripts
• Display the 60-day abatement date in bold font on top of the front page of the notice
• Stop reporting multiple alternative errors instead of adequately describing the error underlying the adjustment

How the Math Act could help taxpayers

Many lawmakers and industry professionals on both sides of the political aisle believe the new law will help taxpayers.

On its website, the National Taxpayer Advocate office applauded the legislation as "a long-overdue reform that strengthens taxpayer rights, improves transparency, and ensures fairness in IRS communications."

Plain language math error notices tied to returns means taxpayers will no longer have to interpret vague or technical letters, which should help reduce confusion and anxiety. The new legislation is expected to:

• Improve the efficient resolution of IRS taxpayer disputes. Specificity in the information flagged allows taxpayers to respond to notices in a timely and accurate way.
• Enable taxpayers to provide the correct documentation the first time, reducing IRS work volume
• Provide taxpayers with a clear understanding of their rights and the steps they must take to challenge an IRS adjustment within the 60-day deadline
• Strengthen public trust in tax administration and promote voluntary compliance

Note: The Math Act likely won’t be fully implemented until late 2026. The IRS says it needs time to develop a formal process for taxpayers to potentially challenge math error notices.

In the meantime, with tax season just around the corner, try to avoid other common tax return mistakes like forgetting or mistyping your Social Security Number on your return, using an incorrect filing status, or failing to sign your return before you file.

Related

• IRS Tax Refund Schedule for 2026
• What are Your Chances of an IRS Audit?
• How to Pay the IRS if You Owe Taxes

Many Americans might have more than one reason to celebrate this year. Tax refunds for the current 2026 tax season are projected to be the "largest ever,” according to an analysis cited by the Republican-led Ways and Means Committee in the U.S. House of Representatives.

The projected increase is expected to boost the average federal tax refund amount by around $1,000 for taxpayers.

However, that benefit is not universal: the size of your tax refund, if any, will ultimately depend on eligibility requirements for tax breaks and other factors (like your filing status and taxable income).

Here are the households that may receive a higher tax refund, and some information on what refunds look like so far this tax season.

Largest tax refunds ever?

“Tax filers could expect an extra $1,000 bump to their tax refund,” The Ways & Means Committee previously reported. “[It] could be a record-breaking tax refund season.”

• The total, accumulated impact of the new law was expected to be $91 billion in additional refunds in 2026 compared to last year, according to the release.
• This potentially would translate to an average tax refund of $4,151 during the 2026 filing season, up from the IRS’s average of $3,151 last year.

The House release used an analysis conducted by Piper Sandler, a financial services firm. The results were shared with the public via a financial podcast.

Like some previous studies of its kind, the Sandler analysis finds that middle and upper-income households, specifically those earning between $60,000 and $400,000, are expected to benefit the most from the new Trump/GOP tax and spending bill.

Update: As of late February 2026, the average IRS tax refund is reportedly approximately $3,809. This is a nearly 9% increase compared to the same period in 2025 ($3,505).

Tax refunds 2026: Bigger checks

Since the Trump tax bill was passed in mid-2025, new tax benefits were not withheld from paychecks during 2025. Because of this, tax refunds are expected to be bigger for those who can take advantage of some of the new provisions.

For instance, you might receive a higher 2026 tax refund if:

• You’re a homeowner in a high-tax state. The new tax law temporarily increased the state and local tax (SALT) deduction from $10,000 to $40,000 annually for households with incomes of $500,000 or less.
• You’re an adult aged 65 or older. The new temporary “senior” bonus deduction may provide tax relief for those with a modified adjusted gross income (MAGI) of $250,000 or less ($175,000 if single filing).
• You’re a tipped employee or overtime worker. The new tip income and overtime tax deductions allow eligible working taxpayers to claim up to $25,000 in federal deductions for the 2026 filing season (for married couples filing jointly; eligible single filers may claim up to $12,500).

Yet it’s important to remember that the anticipated $1,000 increase to tax refunds is an average estimate, and not a guarantee. Your individual financial circumstances impact your overall tax refund, if any. But if you’re anticipating a bigger 2026 tax refund, the IRS recommends steps you can take now to prepare. (More on that later).

Does everyone get a bigger refund in 2026?

Some individuals might not receive a larger tax refund and may even lose out on tax savings or face higher tax bills due to the 2025 Trump/GOP tax and spending law.

For example:

• Low-income households may lose out. As reported by Kiplinger, families earning $53,000 or less could lose an average of $65 by 2033 due to certain cuts to Medicaid and other social programs, and taxpayers earning $18,000 or less could lose 1.1% of their income by 2027.
• Most future student loan forgiveness is federally taxable as of 2026. This reverses the temporary tax exemption provided by the Biden-era American Rescue Plan Act. CNBC reports that a borrower with student debt of approximately $49,321 could see a tax bill increase between $5,800 to over $10,000 in the 2027 filing season.

Note: For more information on these breakouts, read Kiplinger’s report, Biggest Winners and Losers in Trump's New Tax Plan.

IRS tax refund check projection

The IRS has urged taxpayers to prepare early for tax filing.

“It is important for taxpayers to get ready now because the One, Big, Beautiful Bill can significantly affect federal taxes, credits, and deductions,” the federal tax agency announced in a press release.

To help “avoid errors that could delay refunds,” taxpayers are urged by the IRS to gather important tax information, like:

• W-2 Forms, Forms 1099, and other key documents (though delay tax filing until all necessary information is organized).
• Bank account information, including your direct deposit account and routing numbers. Starting this filing season, the IRS is phasing out paper checks (yet limited exceptions may apply).

As Kiplinger reported, the IRS may encounter operational issues this filing season. The agency is operating with significantly reduced staff and a budget cut, which could result in longer phone wait times and even delay tax refunds.

Stay tuned.

Read More

• Are New Trump $2,000 Stimulus Payments Coming?
• IRS Income Tax Refund Schedule: When Will Your Refund Arrive?
• 5 Ways Trump’s Tax Bill Could Boost Your Tax Refund (or Shrink It)
• Not Ready to File Taxes? 8 Things to Do Now to Prepare

You can save more for retirement this year, thanks to an increase in the 401(k) contribution limit for 2026. The IRS adjusts contribution limits and other tax provisions for inflation each year.

High inflation as of late means this is the fourth year in a row that the adjustments have resulted in a higher 401(k) contribution limit. But what about your IRA?

Here’s how much you can contribute to retirement accounts in 2026.

IRA 2026 contribution limits

The contribution limits for a traditional or Roth IRA increased last year and will increase again for 2026.

• You can contribute a maximum of $7,500 (up from $7,000 last year).
• Catch-up contributions for taxpayers 50 and older are also subject to cost-of-living adjustments, and these limits have also increased for 2026 to $1,100 ($8,600 total).

However, not everyone can make the maximum IRA contribution limits this year. You can only make the maximum contribution to your Roth IRA if your modified adjusted gross income (MAGI) is below the threshold set for the year.

• For 2026, single and head-of-household filers with a MAGI below $153,000 (up from $150,000 last year) can contribute the full $7,500 in 2026.
• The maximum contribution is reduced for these filers if their MAGI is between $153,000 and $168,000, and these taxpayers can't contribute to a Roth IRA at all if their MAGI exceeds $168,000.
• For married couples filing jointly, the income phase-out range for 2026 is from $242,000 to $252,000 (up from from $236,000 to $246,000 last year).
• Joint filers with a MAGI below $242,000 can contribute the full $7,500 for 2026, but these filers cannot contribute anything to an IRA with a MAGI greater than $252,000.

(Note: The above income limits do not apply to traditional IRAs.)

401(k) limit increase for 2026 contributions

Contribution limits for 401(k), 403(b) most 457 plans, and the federal government's Thrift Savings Plan will increase by $1,000 for 2026. Eligible taxpayers can contribute $24,500 to these accounts in 2026 (up from $23,00 last year).

The contribution limit for SIMPLE plans increases to $17,000 this year (up from $16,500 last year). Similarly, participants of an applicable SIMPLE plan might be able to contribute a higher amount of $18,100 (up from $17,600 last year).

401(k) 2026 catch-up limit

There's an increase in catch-up contribution limits for taxpayers 50 and older for 2026. These taxpayers will be able to contribute an additional $8,000 in 2026 ($32,500 total).

However, under SECURE 2.0, a higher catch-up contribution limit applies for those age 60 to 63 beginning this year. (Participants in that age range could contribute an additional $11,250 instead of $8,000.) The total potential contribution amount for these taxpayers is $35,750.

For more information, see Kiplinger's report: 'Super Catch-Up' Contribution for Ages 60-63.

The catch-up contribution limit for employees age 50 and older who participate in SIMPLE plans also has increased for 2026, to $4,000 (certain applicable plans might have a contribution limit of $3,850).

But under a new change under SECURE 2.0, those who are 60 to 63 can contribute more to SIMPLE plans, ($5,250) for 2026.

IRA deduction phase-out thresholds for 2026

If you put money in a traditional IRA, you might be able to take a tax deduction for some or all your contributions. (There is no deduction available for contributions to a Roth IRA.)

However, the deduction is gradually phased out if your income is above a certain amount.

Here are the phase-out ranges for 2026.

• For single taxpayers covered by a workplace retirement plan, the phase-out range is from $81,000 to $91,000 (up from from $79,000 to $89,000 last year).
• For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is from $129,000 to $149,000 (up from $126,000 to $146,000 last year).
• For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is from $242,000 to $252,000 (up from from $236,000 to $246,000 last year).

If you are married and filing a separate return (and covered by a workplace retirement plan), the phase-out range remains from $0 to $10,000 because this limit is not subject to a cost-of-living adjustment.

Saver's Credit income limit for 2026

Americans with lower and middle incomes who contribute to a retirement plan can claim the Saver's Credit on their federal tax return, which could lower their tax bills.

However, not everyone qualifies. Here are the new income limits for claiming the Saver’s Credit in 2026.

• $80,500 for married couples filing jointly (up from $79,000 last year).
• $60,375 for heads of household (up from $59,250 last year).
• $40,250 for single and married taxpayers filing separately (up from $39,500 last year).

Read More

• 2026 HSA Contribution Limit: What You Should Know
• Saver's Credit: Who Qualifies for This Retirement Tax Break?
• New 2026 Income Tax Brackets Are Set

With the giving season officially underway, December 31 marks your critical tax deadline for charitable giving. About 30% of annual gifts occur before year-end, making this the prime time for taxpayers to maximize their 2025 itemized charitable donations tax deduction.

And for high-income earners, charitable giving in 2025 is particularly vital. Tax legislation in 2026 will cap the maximum federal tax benefit at 35%, effectively making contributions this year far more valuable. Plus, a new rule next year will further reduce the allowable charitable deductions for donors over a certain floor limit.

Here’s what you need to know.

Related: The 'Scrooge' Strategy: How to Turn Old Junk Into a Tax Deduction

Charitable deduction for high-income earners in 2025

Let’s first review why donating this year, in 2025, is more advantageous than in 2026. Basically, the 2025 Trump Tax Bill changed several rules regarding charitable donations. A couple of those changes affecting high earners are summarized in the following table.

As you can see, for 2026, a charitable contribution "floor" will be introduced for itemizers, regardless of income level. Only total contributions above 0.5% of your AGI will be deductible.

For example, if you had $200,000 AGI and donated $2,000, only $1,000 would be deductible.

Charitable contributions for high-income itemizers will also be subject to a cap in 2026. The new law imposes a 35% limit on the value of all itemized deductions for high earners, meaning taxpayers in the top bracket will receive a lower tax break compared to 2025.

While excess contributions can still be carried forward for up to five years, carryforwards used in 2026 and beyond will be subject to the new limitations.

So below are three ways for you to take advantage of the more advantageous donation rules in 2025 — especially if you’re a high earner.

1. Donate stock to charity (or other appreciated non-cash assets)

You may have heard that donating appreciated stock (or other non-cash assets) is a part of a good charitable deduction strategy. Well, that’s because donating these assets provides a “double” tax benefit.

• You can deduct the asset’s full fair market value, pre-tax. If your asset’s fair market value (FMV) is higher than “cost-basis” (what you paid), the gain is not taxable once donated to a qualified, public charity.
• This allows you to avoid capital gains tax. By transferring the asset directly to your chosen charity, you’ll avoid paying capital gains tax (up to 20%) on the increase in the asset’s value. Plus, you may also avoid paying the 3.8% net investment income tax (NIIT).

Of course, there are a couple of caveats when donating appreciated non-cash assets.

• Namely, the donated asset must have been held for more than one year before donation; otherwise, the asset will be donated at cost-basis, which could be significantly lower than the value of an appreciated stock.
• Also, donations of appreciated stock to a public charity are subject to a 30% AGI limit, which is higher than the AGI limit for cash (60%). Despite this difference, avoiding capital gains tax typically makes donating the asset (rather than selling and donating the cash) more tax-advantageous.

If you donate appreciated assets to specific types of accounts, your donations may also yield tax-free growth for future charitable giving. One such account that high-earners typically use is a donor-advised fund (DAF).

2. Use a donor-advised fund (DAF) bunching tax strategy

A donor-advised fund (DAF) allows you to claim an immediate tax deduction for your contributions this year (under the more favorable 2025 rules), while the fund recommends grants to your chosen charities over time.

Given the flexibility in timing, a DAF is often used in conjunction with a tax strategy called “bunching.” This is where you pay two or more years’ worth of itemized expenses in the current tax year to push your total itemized deductions over the standard deduction amount.

• If performed correctly, “bunching” your deductions gives you one year of high itemization followed by one year of the standard deduction, which maximizes your total tax savings for both years.
• Using a DAF-bunching strategy is particularly beneficial for high-income earners who anticipate a higher federal income tax rate in 2026, when charitable giving tax laws will be less favorable.
• Plus, tax-free growth in a DAF means you can pay out more money in the future, amplifying your philanthropic impact.

Also, bunching doesn’t just exist for charitable deductions. You can front-load other popular itemized deductions, like the state and local (SALT) deduction, the medical expense deduction, and even the mortgage interest deduction, to help push your deduction amount higher than the standard. Yet keep in mind that certain AGI limits and other IRS rules may apply to each itemized deduction.

3. Make a charitable IRA distribution (QCD)

A qualified charitable distribution (QCD) is a distribution from your IRA to a qualified charity of your choice. QCDs are particularly beneficial if you’re trying to avoid taking your required minimum distribution (RMD) and still want to meet your charitable giving goals for the year.

Here are the eligibility requirements for 2025:

• You must be age 70 ½ or older.
• You can donate up to $108,000 (or $216,000 if married spouses) in a single tax year.
• The distribution must be made from a traditional IRA, an inherited IRA, or an inactive SEP/SIMPLE IRA.

Although QCDs require that you “give up” a portion of your annual IRA distribution to a charity, that amount is excluded from your AGI.

This lower AGI may reduce your taxable income, thereby lowering your tax on Social Security benefits for the current year. Even better, reducing your AGI helps lower your income for the Medicare premium calculation two years later, potentially allowing you to avoid higher premiums.

But a QCD doesn’t qualify as an itemized “charitable deduction” on your income taxes, which may hamper your bunching strategy. You also can’t use a DAF to make a QCD, so be sure to review your complete charitable giving strategy before making one.

Changes to charitable donations in 2026

While we covered several notable ways to maximize your gifting strategy in 2025 if you’re a high-income earner, here are a couple of other gift tax changes going into effect in 2026:

• Increased estate tax exclusion. While the basic exclusion amount for individuals was $13.99 in 2025, the exclusion was increased to $15 million in 2026. This may affect your gifting strategy as a higher exclusion amount allows individuals to transfer more wealth to heirs estate tax-free.
• New non-itemizer charitable deduction. A federal deduction for non-itemizers up to $1,000 for single filers (or $2,000 for joint filers) will be available in 2026. However, you can’t use this deduction in conjunction with DAF or private foundations.

Of course, these changes may not affect everyone, depending on your gifting strategy. Also, state tax rules may differ. Consult with a qualified tax professional to discuss which tax strategies are best for your financial circumstances.

Read More

• 10 Retirement Tax Plan Moves to Make Before Year-End
• What is the Gift Tax Exclusion for 2025 and 2026?
• 2025 Roth Conversion Strategy: 6 Reasons to Convert (& When Not to)
• How Charitable Donations Can Reduce Your Taxes
• 3 Major Changes to the Charitable Deduction in 2026

Put down the pumpkin pie and get ready for tax planning: These retirement tax moves could help you prepare for 2026.

Retirees are in a unique planning position compared with other tax filers heading into the winter season. Not only are they faced with complex withdrawal rules on RMDs, but many have access to age-specific tax deductions, including the new $6,000 “senior bonus” deduction.

Whether you leverage this time by making strategic money moves or wait until the last second to act can affect your financial position next year (and potentially this year).

Here are 10 tax moves you can make before December 31 to optimize next year’s retirement income and potentially lower your 2025 tax bill.

Retirement tax plan in 2025 and 2026

Kiplinger only considered individual income returns for the retiree tax planning checklist. As such, business taxes were excluded, as well as educational expenses or tax breaks typically associated with self-employment.

The retirement tax moves listed might be affected by a taxpayer’s income level and filing status. State retirement tax treatment may differ.

Consult with a qualified tax professional for specific advice on your financial situation.

RMDs

1. Review your 2025 RMD (and 2026) tax strategy

As a retiree, you might already be familiar with the concept of required minimum distributions (RMDs). An RMD is money that must be withdrawn from a 401(k), 403(b) or other traditional IRA every year after you reach a certain age. If you don’t make the withdrawal, you could be subject to a 25% penalty on the amount not distributed.

Here are the current age requirements for RMD withdrawals:

• If you’re 73 or older, you must take an RMD from your retirement accounts by December 31.
• If you turned 73 in the current year, your first RMD is due by April 1 of the following year, but your second RMD is still due by December 31 of that same year.

If you’re subject to RMD rules and haven’t already withdrawn your RMD for 2025, you should do so now to avoid the penalty. But you’ll also want to look at 2026’s RMD withdrawal for retirement tax planning purposes. This might help you avoid common RMD tax traps:

• Preventing the “two RMD trap.” The IRS gives an extended deadline of April 1 to take your first RMD. However, all subsequent RMDs must be taken by December 31, meaning that if you delay until April, you’ll have to take two withdrawals in one year. That could push you into a higher tax bracket and increase your overall tax liability for that year.
• Reducing investment risk. RMDs are calculated in part using your RMD account balance from the prior year. If there’s a market downturn in, say, 2026, you’ll still have to withdraw the predetermined amount at the end of 2025 (which might have been higher). This could result in the forced selling of IRA investments at a lower value just to satisfy your RMD obligation.

By reviewing your RMD withdrawal strategy now, you can minimize the effect of market volatility on your portfolio. This often means strategically withdrawing cash or bonds during downturns.

Alternatively, during an economic upturn, you’d likely want to take your RMD earlier in the year, locking in investment gains by selling fewer shares to meet the RMD amount.

You can also take steps to lower your taxable income from other revenue streams, which helps to counteract the larger taxable income resulting from RMDs and keeps your overall tax bill more manageable in 2026.

For more information, see Required Minimum Distributions: Rules, Deadlines, and Key Points to Know.

IRA Conversion and Investment Timing

2. Take advantage of capital loss carryover: Tax-loss harvesting

Tax-loss harvesting is the strategic practice of selling taxable account investments (such as trusts or brokerage accounts) to maximize tax savings. Here’s how this strategy works:

• You have at least one capital asset (such as real estate, stock, etc.) that you sell for more than you paid for it, resulting in a capital gain.
• You sell at least one investment for less than you originally paid, resulting in a capital loss.
• Then you offset the total amount of capital losses against your capital gains, effectively leading to a 0% tax on any gains offset by losses.
• If your total capital losses are greater than your gains for the year, you can use the excess to deduct up to an additional $3,000 against your ordinary income. Any remaining losses that exceed this $3,000 limit are carried forward indefinitely to offset future capital gains.*

When would tax-loss harvesting be useful? Here are a few examples:

• If you’re subject to the highest tax rate on capital gains, you can avoid that tax through tax-loss harvesting, resulting in valuable savings. Those savings can be reinvested in securities or used to help rebalance your portfolio.
• By deducting up to $3,000 of capital losses against ordinary income, you can save on taxes typically levied on retirement plan distributions, pensions, and other ordinary income sources. An unlimited amount of capital loss might be carried forward to offset gains from real estate sales, mutual funds, ETFs, etc..

However, before you commit to tax-loss harvesting, look out for the “wash sale rule,” which says you can’t reinvest in similar securities 30 days before or after you sold the capital loss ones. If you do, your capital losses won’t count as an offset to your capital gains.

*Note: The deduction amount is $1,500 for taxpayers married filing separately.

For more information, see: Capital Losses: Rules to Know for Tax Loss Harvesting.

3. Perform a Roth conversion

If you have a traditional retirement savings account (such as a 401(k), 403(b) or traditional IRA), you might be wondering: Is now the right time to convert to a Roth IRA?

The trade-off is clear: With a traditional IRA, you pay taxes when you take a distribution; with a Roth account, you pay taxes now on the funds you contribute.

Consequently, converting from a traditional IRA to a Roth means you must pay the income tax in the year of conversion, but the potential long-term benefits of tax-free growth might be worth the upfront cost.

Reasons you might consider converting your traditional IRA to a Roth account:

• You expect your 2026 income tax rate (or later) to be higher. Often, there’s a “lull” for retirees in the years after they stop working and before they start receiving Social Security, where income is at its lowest. If you’re there now, you might consider converting to a Roth before the end of 2025, and your income (and/or federal tax rate) is higher.
• You want to avoid RMDs. Those yearly required withdrawals from your IRA disappear with a Roth conversion. Your money in a Roth account grows tax-free throughout your entire lifetime and gives you greater control of when and how much you withdraw each year, which might be ideal for those who want more flexibility with their retirement tax plan.
• You plan to leave money to your heirs. If you have a valuable estate, a Roth generally offers beneficiaries tax-free withdrawals. Comparatively, traditional IRA withdrawals are taxed as ordinary income for your heirs.

*Note: If you're 73 or older at the time of the conversion, you must first take your RMD from your traditional IRA for the year of the switch.

But the grass isn’t always greener on the Roth side of things. Here are a few reasons why you wouldn’t convert a traditional IRA to a Roth:

• You expect your 2026 income tax rate (or later) to be lower or the same. If your projected future tax rate is lower than your current rate, you might not want to convert a traditional IRA to a Roth, as you would be paying taxes at a higher rate vs later (in 2026) when your rate is lower.
• You have to use IRA funds just to pay the conversion tax bill. Converting a traditional IRA to a Roth requires you to pay the federal income tax owed upfront. If you're forced to use funds from the traditional IRA to pay off the conversion taxes, the conversion can incur early withdrawal penalties. Taking an early withdrawal not only diminishes your savings but also significantly lowers the primary benefit of the Roth account: Tax-free growth.
• You need to use the converted funds within five years. If you’re under 59½, you can’t use your funds for five years after a traditional IRA to Roth conversion. Otherwise, you could be subject to a 10% early withdrawal penalty. (However, if you’re older than 59½, you might withdraw the funds penalty-free before the five years are completed, though any earnings on those funds will be subject to income tax.)

Like other checklist items on this retirement tax planning list, you’ll want to consider your overall retirement tax strategy when deciding whether to convert your traditional IRA to a Roth account. However, the deadline to complete a 2025 conversion is December 31.

For more information, check out Kiplinger's report, 6 Tax Reasons to Convert Your IRA to a Roth (and When You Shouldn't).

4. Convert a 529 to a Roth (if you can)

While we’re on the topic of conversions, let’s review an exciting (and relatively new) tax law: The Secure Act 2.0. Among other things, this law enacted a provision that allows you to convert a 529 savings plan into a Roth account.

Here are the rules for a 529 savings account to Roth IRA conversion:

• The 529 plan must have been open for at least 15 years.
• Plan contributions must have been held in the account for at least five years before conversion.
• The beneficiary for both the 529 and the Roth must be the same, and the transfer must be direct: From one plan trustee to the other trustee.
• The beneficiary must have earned income at least equal to the amount of the rollover.
• You might roll over up to $35,000 of unused 529 funds into a Roth IRA (per beneficiary). That’s a lifetime limit, meaning you’ll need to total all transfers across all 529 plans that are rolling over into Roths.

The rollover is subject to the annual Roth IRA contribution limits. (You might want to spread a large conversion over several years.) But if you can roll over your 529 plan into a Roth, the federal tax benefits might be worthwhile.

Benefits of a 529 to Roth conversion. You won’t be taxed federally on the conversion. Plus, you’ll avoid penalties for withdrawing funds from a 529 for non-educational expenses, with the added benefit of jumpstarting the beneficiary’s retirement savings.

Itemized deduction timing

5. Organize your bunching strategy for tax deductions

The tax strategy of “bunching” means you pay two years’ worth of itemized expenses in the current tax year to push your total itemized deductions higher than the standard deduction amount.

If performed correctly, you’ll gain one year of high itemization followed by one year of the standard deduction, which maximizes your total tax savings for both years.

Bunching deductions typically relies on the fact that you:

1. Can claim the itemized deduction on your income tax return (at least for the year that you “bunch”)
2. Have the flexibility to pay for some of your expenses early

You should consider bunching your deductions in 2025 if you anticipate a higher federal income tax rate in 2026. Bunching deductions might also be beneficial if you expect your tax situation to be negatively impacted by new tax legislation in 2026, such as the new AGI floor for itemized charitable deductions (more on that later).

Here are a few ways you might “bunch” your deductions and acquire tax savings in 2025:

• Maximizing the state and local (SALT) deduction. Starting in 2025, you can deduct up to $40,000 in SALT on your federal income return (if you meet income requirements). By prepaying your fourth-quarter property taxes before December 31 (if your state allows it), you could reach higher tax savings before the AGI floor kicks in in 2026.
• Front-load charitable contributions. You can use a donor-advised fund to take advantage of more favorable tax rules in 2025 (more on that below).
• Pay high medical expenses early. Do you have significant medical expenses scheduled for early 2026? If those qualified procedures are near the 7.5% AGI threshold for the medical expense deduction, consider paying them before the end of 2025 to take advantage of bunching.*

*Any medical procedures completed “substantially beyond” 2025 might not qualify for the medical expense deduction in 2025.

6. Finish your charitable donations

If you itemize, be sure to finish making your charitable contributions before the December 31 deadline. Donations can be a powerful way to reduce your taxable income for the year. (Though adjusted gross income (AGI) limits apply.)

Starting in 2026, the rules for itemizing charitable giving will get tighter, making your contributions this year even more valuable.

That’s because the Trump/GOP 2025 spending bill, known to some as the “One Big Beautiful Bill,” provides an AGI floor for itemizers as well as a deduction cap for high-income earners in 2026. Here’s a table summarizing the new tax rules for charitable deductions going into effect next year:

For 2026, a charitable contribution "floor" will be introduced for itemizers, regardless of income level. Only total contributions above 0.5% of your AGI will be deductible. For example, if you had $200,000 AGI and donated $2,000, only $1,000 would be deductible.

Charitable contributions for high-income itemizers will also be subject to a cap in 2026. The new law imposes a 35% limit on the value of all itemized deductions for high earners, meaning taxpayers in the top bracket will receive a lower tax break compared to 2025.

Both of these provisions make “bunching” deductions more valuable than ever. You can achieve this by contributing to a donor-advised fund (DAF). A DAF allows you to claim an immediate tax deduction for your contributions this year (under the more favorable 2025 rules), while the fund awards the “bunched” money to your chosen charities over time. This might help you maximize your deduction before the 2026 limits take effect.

For more information, see our guide: The Charitable Donation Tax Deduction: What to Know.

Optimize Retirement Tax Efficiency

7. Consider making a qualified charitable distribution in 2025

A qualified charitable distribution (QCD) is a distribution from your IRA to a qualified charity of your choice. However, not everyone’s eligible to make one. Here are the eligibility requirements for 2025:

• You must be age 70½ or older.
• You can donate up to $108,000 (or $216,000 if married spouses) in a single tax year.
• The distribution must be made from a traditional IRA, an inherited IRA, or an inactive SEP/SIMPLE IRA.

QCDs require that you “give up” a portion of your annual IRA distribution to a charity, effectively going without your hard-earned cash. But making a QCD goes hand-in-hand with many of the retirement tax items we’ve already covered on our list. For example:

• Avoiding the taxability of RMDs. If you don’t need all the money from your RMD, you can donate a portion as a QCD. This has the double benefit of satisfying your RMD while paying no federal income tax on the portion you donate.
• Lowering your AGI. Remember that charitable deduction cap coming into effect in 2026 for high-income earners? If you make a QCD in 2026, you can effectively reduce your AGI, potentially lowering your federal income tax bracket next year and thereby avoiding the new AGI cap.
• Reducing high taxes on Social Security benefits and Medicare premiums. Because your QCD lowers your gross income, you might see a reduction in the amount of tax you pay on Social Security in the year you made the QCD, or your Medicare premium tax two years later.

That said, a QCD doesn’t qualify as an itemized “charitable deduction” on your income taxes, which might hamper your bunching strategy. You also can’t use a DAF to make a QCD, so it might make your approach to donating less flexible.

For more information, see: What is a Qualified Charitable Distribution?

8. Update your retirement income withholding

There are two primary methods for retirees to pay federal income taxes. The first is through estimated tax payments, which are due quarterly.

The second is through automatic withholding by filling out the appropriate form (e.g., pensions and annuities use Form W-4P, Social Security benefits use Form W-4V, etc). We’re going to discuss the withholding option.

You should review your retirement withholding form(s) annually for potential changes in your tax situation. This is particularly pertinent for 2026, when the withholding forms will be updated for new tax deductions such as:

• The car loan interest deduction. Worth up to $10,000 on qualifying new vehicles, some suggest the estimated annual tax savings could average around $400 to $500 per taxpayer in 2026.
• The bonus deduction for those age 65 or older. Worth up to $6,000 for eligible individuals with less than a certain income, the Tax Policy Center estimates that about half of eligible older adults will see some benefit.

The main benefit of updating your retirement withholding is that you can take advantage of the tax deductions throughout the year instead of just at year-end.

Not only does this give you more income month-to-month, but you can also invest those extra dollars into a savings account or other security and start accruing interest right away.

The IRS considers withholding to be paid “evenly throughout the year” regardless of when you actually withheld your taxes. If you accidentally underpay your taxes during one quarter, you can increase your withholding toward the end of the year and cover the shortfall. This is another reason you should review your retirement tax withholding before December 31.

Review Important Tax Documents

9. Review health care coverage: Open enrollment for Medicare

We’re in full swing of open enrollment season (which typically lasts until December 7 for Medicare, and until January 15 for Affordable Care Act (ACA) marketplace insurance). This is the time to ensure your health care coverage and plan costs still meet your needs and compare potential alternative plans.

Reviewing your medical plans might be more important than ever. If you’re currently using ACA subsidies, those are scheduled to expire at the end of 2025 (unless Congress acts). The expiration is expected to lead to significant premium increases and higher out-of-pocket costs for many enrollees in 2026.

• Medicare premiums and IRMMA are projected to increase. As reported by Kiplinger, Medicare Part B premiums and deductibles are expected to increase by about 12%, and Part D IRMMA surcharges might increase by as much as 6%.
• Prescription drug coverage will likely see a higher maximum deductible. Current estimates place the projected 2026 out-of-pocket cost cap at $2,100, compared to $2,000 in 2025.

What should you do? Review the Annual Notice of Change (ANOC) letter you received from your current insurer to understand the plan changes going into effect in 2026. The ANOC might inform you of income-related premium increases and if your doctor network is still covered.

By using previously discussed tax strategies like QCDs or Roth IRA conversions, you might be able to reduce high anticipated Medicare premiums.

However, keep in mind that Medicare premiums are calculated on modified adjusted gross income (MAGI) from two years prior. Any change you make in tax year 2025 will not impact your Medicare premiums until 2027.

Related: Health Insurance Tax Credits and the Government Shutdown: What to Know.

10. Review your estate planning goals

Lastly, now’s a good time to review your will, power of attorney documents, and beneficiary designations on all retirement accounts and insurance policies.

Reviewing those important documents each year helps ensure that your estate-planning goals still align with your current retirement goals, especially in light of new tax rules.

Here are a couple of things to know regarding your 2026 estate tax plan:

• The annual gift tax exclusion remains the same. For both the 2025 and 2026 tax years, the annual gift amount is $19,000 (single filers) or $38,000 (married filing jointly couple). Gifting money tax-free helps minimize estate tax liability for your heirs when you pass away.
• The estate tax exclusion amount increased. While the basic exclusion amount for individuals was $13.99 million in 2025, the exclusion was increased to $15 million in 2026. This allows individuals to transfer a larger amount of wealth estate tax-free, potentially offering heirs more post-tax funds.

While the estate exemption amount remains high in 2026, you might want to make large gifts in 2025 to “lock in” asset values if you think those assets could appreciate significantly. This effectively moves that future appreciation out of the estate, avoiding estate tax on future growth.

At the same time, assets in an estate are given to heirs at a “stepped up” basis, meaning the heir receives those assets at fair market value. This effectively eliminates the capital gains tax (should your heir later decide to sell the asset) and is one of the benefits of keeping assets in an estate.

Everyone’s estate tax liability looks different. Outsource your taxes to a qualified tax adviser when necessary.

Read More

• How the IRS Taxes Retirement Income
• The Rubber Duck Rule of Retirement Tax Planning
• New Tax Rules High-Income Earners Should Know Before Donating in 2025
• Test Your Retirement Tax IQ: How Much Do You Know?

Paying taxes may be the last thing on your mind as you head into a busy season of turkey, stuffing, and televised football. You may even feel tempted to hand over your income return to a professional before tax season begins. And according to a new survey, that’s not a surprise.

Market research company, Talker Research, recently found that, at a certain stage in life, more than a third of taxpayers are “happy to just let professionals handle their taxes for them,” citing that finances may get “too complicated the more you age.”*

Age aside, there are several circumstances when professional tax assistance could be beneficial, like when you’re trying to navigate complex rules surrounding foreign-earned income or cryptocurrency investments. Yet there are situations where you may not benefit from hiring a tax preparer. Here’s more of what to know.

*The Talker Research survey was commissioned by TaxSlayer Pro, conducted online, and surveyed 2,000 U.S. taxpayers.

When to hire a tax professional for filing taxes

The Talker survey found that the “average American” turns to professional tax help by age 29 for a variety of reasons:

• Investments. About 23% turn to professionals before 30 because they’ve begun investing.
• Bandwidth. Almost one-quarter of respondents say they don’t have the time to handle their own taxes.
• Life events. At least 20% of “younger” taxpayers look for a tax professional after getting married, and 15% opt for a tax preparer after buying a home.

“For many Americans, big life milestones like getting married or buying a home can make filing taxes start to feel overwhelming,” said Richard Marshall, Director of Sales at TaxSlayer Pro, in the survey’s press release. Research shows the average marriage age for men is around 30, and for women, 28. “...another motivator for people — especially this year — is when tax laws change.”

True, the big Trump/GOP tax and spending bill, also known as the “big beautiful bill,” made significant changes to tax provisions in 2025. Among other things, eligible taxpayers can now take an interest loan deduction for some cars, potentially claim a higher deduction for state and local taxes, and deduct tips and overtime pay on their federal income returns.

But do concerns about missed opportunities justify hiring a tax professional? Well, that depends on whether you have a complicated tax situation, regardless of age.

Are tax preparers worth the cost?

A tax preparer can be valuable when your financial situation is “complex.” Here are a couple of scenarios where attempting to manage your taxes without professional help could be complicated:

• If you have several sources of income. Over 25% of Americans surveyed by Talker had multiple sources of income (this may include gig work, rental income, etc.). Several revenue streams can complicate the tax filing process, as different tax rules may apply to each additional source.
• If you own a business. Almost half of self-employed taxpayers surveyed said they have consulted with tax preparers about how to manage business taxes. Business tax laws can present significant compliance issues or unique record-keeping challenges compared to individual income tax returns.

Tax compliance is a key issue when your income tax return is complicated. The North Carolina Association of CPAs found that an average IRS “mail” audit led to $6,000 in additional taxes for taxpayers. And in-person IRS audits averaged a whopping $21,000 to $22,000 in unexpected taxes.

Hiring a tax professional may help you avoid the risk of an IRS audit, thereby possibly saving you money. The cost of outsourcing your taxes fluctuates based on the number of hours your tax preparer spends and/or how many tax forms you need filed. The typical fee for a tax preparer, like a CPA, can range from $200 to over $2,500 for one income return.

However, you should steer clear of a “one size fits all” approach. As reported by Kiplinger, less than 1% of all individual tax returns have been audited in recent years, so not everyone is at risk of a costly mistake. You may opt for software to file your taxes instead if your tax situation is simple. For instance, some taxpayers use IRS Free File each year, while millions were eligible for Direct File last year.

Choosing between a CPA and DIY tax software

At least 60% of taxpayers surveyed by Talker said they still file their own taxes — so if you’re one of them, you're not alone. You may be able to skip the professional and do your own tax filing if you fall into at least two of the following categories:

• Claim the standard deduction. IRS data show that about 90% of taxpayers choose the standard deduction over itemizing. This means you wouldn’t use your itemized receipts for medical expenses, charitable contributions, etc., for income tax purposes.
• Only have one or two W-2s. Even if you’ve changed jobs in the last year, you may not need a professional’s help. (But residing in two or more states might make your tax reporting more difficult.)
• You don’t have a business, rental properties, or tricky investment income. Significant or complex investments may warrant a tax professional’s help (e.g., cryptocurrency investing or investments that require you to pay net investment income tax).

If you meet none or only one of these criteria, you may wish to consult a qualified tax preparer, like a CPA. But in reality, your comfort level with taxes and the complexity of your situation dictates whether you need a tax professional.

Also, tax situations change. Reevaluate every year whether you would like a professional’s help. After all, more than half of do-it-yourself taxpayers from the Talker survey admitted they’d use a tax preparer if their situation got more complicated in the future. Although there’s no perfect “age” to hand over your taxes to a professional preparer, there’s certainly a perfect time to start tax planning: Now.

Read More

• Types of Income the IRS Doesn't Tax
• 2025 Tax Brackets and Federal Income Tax Rates
• Tax Breaks for Middle-Class Families Claiming the Standard Deduction

Your 2026 paycheck may be about to get a boost: New and increased tax breaks from the 2025 Trump/GOP spending bill could allow millions of workers to increase their monthly take-home pay next year.

How? Well, you’ll have to update your federal tax withholding.

Your withholding is the amount your employer takes out of each paycheck to pay taxes on your behalf. It’s typically a form you fill out when you start a new job, but the IRS recommends reviewing your W-4 Form annually to avoid costly mistakes.

For example, if you qualify for a new federal tax deduction, waiting until year-end to claim that tax break could lead to missing out on monthly savings, potentially giving the government an interest-free loan of your money until tax time.

So if you want to keep more of your take-home pay as you receive it in 2026, here are three critical tax changes that could boost your paycheck — if you qualify and update your Form W-4, that is.

Key tax changes to boost pay in 2026

To find the three critical tax changes for 2026 paychecks, Kiplinger considered tax breaks the IRS will soon add to its Tax Withholding Estimator that could affect workers.

• Taxpayers may use the estimator tool to help calculate federal tax withholding.
• This information can then be utilized to help fill out IRS Form W-4, Employee’s Withholding Certificate, with your employer.
• Only tax deductions with annual estimated savings above $1,000 qualified as “critical.” Estimated tax savings were referenced from the Tax Policy Center and The Tax Foundation, the latter of which sourced data originally published by the U.S. Census Bureau.

While Kiplinger notes estimates of how much you could save with these tax breaks, any actual tax savings may depend on several factors, like your filing status, applicable restrictions, and federal income tax bracket in 2026.

That said, here are three critical tax break changes that could boost your paycheck in 2026.

1. Tip income tax deduction in 2026

Tax deduction amount in 2026 (maximum): $25,000

Average estimated tax savings in 2026: $1,400

The new tip income deduction is a temporary tax break for tax years 2025 through 2028.

Although the deduction can be as high as $25,000 per tax return, the Tax Policy Center projects an average benefit of approximately $1,400 for each eligible household in 2026. That’s over $100 per month in tax savings, if you qualify and update your withholding.

Here are a few fast facts about the federal tipped pay tax deduction:

• Only “Qualified” tips are eligible, including voluntary cash and charged tips (like credit card or PayPal).
• Payroll taxes still apply (that is, the deduction doesn’t reduce Social Security or Medicare taxes).
• Your tip deduction starts to be reduced if you’re a single-filer with a modified adjusted gross income (MAGI) of $150,000 or more (married filing joint filers have a MAGI limit of $300,000 or more).

For every $1,000 your MAGI exceeds the above limits, your tip income deduction is diminished by $100. The deduction is completely phased out for single filers with $400,000 in MAGI and joint filers with MAGI of $550,000.

Plus, only certain professions qualify. The list of qualifying professions from the Treasury/IRS currently includes:

• Wait staff and bartenders.
• Food servers, chefs, and cooks.
• Dancers, musicians, singers, and digital content creators.
• Housekeeper cleaners and resort desk clerks.
• Home plumbers, electricians, and landscapers.
• Private event planners, pet caretakers, and tutors.
• Hairstylists, Tailors, makeup artists, and pedicurists.

While the IRS hasn’t released a final 2026 W-4 Form, you can start thinking about your withholdings with the draft version released late last month.

However, you’ll need to know an estimate of your qualified tip income for 2026 to plan how this federal tax break may affect your withholding. You can start by using your reported tips on last year’s tax return as a baseline and then project your qualified tips for 2026.

2. Overtime tax deduction for 2026 paychecks

Tax deduction amount in 2026 (maximum): $25,000

Average estimated tax savings in 2026: $1,400

Similar to the tax deduction for qualified tip income, qualifying non-exempt employees may be eligible to claim an overtime pay deduction from tax years 2025 through 2028.

The overtime deduction is worth up to $12,500 for single filers and $25,000 for joint filers, which the Tax Policy Center estimates could average about $1,400 per qualifying household next year.

Here are a few fast facts about the federal overtime pay tax deduction:

• You must work more than 40 hours per week.
• You must be a non-exempt employee who earns overtime under the federal Fair Labor Standards Act (FLSA).
• Single filers with more than $150,000 in MAGI will see their deduction reduced, while married filing joint couples won’t see a phase-out begin until their MAGI exceeds $300,000.

The overtime deduction is reduced by $100 for every $1,000 MAGI over the thresholds. When single filers have MAGI of $275,000 or more (and married filing jointly couples with $550,000 or more), the overtime deduction is completely phased out.

Like the tip income deduction, you can start thinking about adjusting your tax withholding for how much overtime pay you expect to receive in 2026. Begin with your 2025 overtime pay as a starting point. If you're unsure of this amount, consult your employer or refer to your pay stubs.

But keep in mind the overtime deduction only applies to the “extra” half of your time-and-a-half rate, not total overtime wages. That means your regular hourly rate is subtracted from your overtime rate when determining the deduction.

3. SALT deduction for 2026 withholding

Tax deduction amount in 2026 (maximum): $40,400

Average estimated tax savings in 2026: $4,722 to $14,974

The unlimited state and local tax (SALT) deduction was capped at $10,000 seven years ago by the Tax Cuts and Jobs Act (TCJA).

In 2025, the GOP tax bill temporarily raised the SALT deduction cap for certain taxpayers. This cap is projected to rise by 1% in 2026, increasing from $40,000 to $40,400.

Here are a few fast facts about the SALT tax deduction cap:

• Itemizing taxpayers could save up to $40,400 on federal taxable income in the 2026 tax year (returns normally filed in 2027).
• However, single filers in tax year 2026 will be subject to a phase-out of the SALT deduction when MAGI reaches $505,000 or more ($252,500 if married filing separately).
• For every dollar your income surpasses the above thresholds, your SALT deduction cap will be reduced by 30 cents.
• Your SALT cap will return to the original $10,000 limit once your income no longer qualifies for the deduction.

Claiming the SALT deduction largely depends on whether you itemize deductions on your return and how much state and local taxes you pay. So, individual tax savings may vary widely.

For example, the Tax Foundation estimates the average SALT paid per capita is between $4,722 and $14,974 annually. If you’re on the low end of that spectrum, you likely won’t see any benefit from this raised deduction cap, but if you’re on the high end, a higher SALT cap could make it worth the effort to update your federal withholding.

But beware if you’re in the highest tax bracket. That’s because those in the top 37% federal bracket for 2026 will be subject to a 35% rule on itemized deductions. This rule caps each itemized dollar to 35 cents worth of tax benefits (rather than 37 cents). Thus, if you’re a high-income earner, the 35% rule may limit the amount of estimated SALT deduction you should enter on your W-4 Form for 2026.

New federal tax withholding in 2026

While we covered three major 2025 tax breaks that could boost your monthly paycheck in 2026, the IRS will update its estimator tool with several other key tax breaks that may affect your work withholding to a lesser degree.

• The car loan interest deduction. Worth up to $10,000 on qualifying new vehicles, some suggest the estimated annual tax savings could average around $400 to $500 per taxpayer in 2026.
• The bonus deduction for those aged 65 or older. Worth up to $6,000 for eligible individuals with less than a certain income, the Tax Policy Center estimates that about half of eligible older adults will see some benefit.

The IRS is expected to release a final version of the 2026 W-4 Form by the end of December. So if you’re thinking about claiming these or other federal tax breaks on your withholding, wait until the finalized version is published to submit a new or updated form to your employer.

Also, it’s important to remember that not all tax savings may apply to you, and restrictions or certain limitations may apply to these and other tax deductions.

Double-check that you are fully eligible for the amount you claim on your Form W-4 before entering the deduction amount on your tax withholding. Otherwise, you could be in for a rude awakening at year's end with a hefty tax bill, fees, and even penalties.

The IRS Estimator may also be a helpful tax planning tool for other IRS withholding forms, like the Form W-4P (for retirees) and Form 1040-ES (for quarterly estimated tax payments). The estimator tool does not account for state income tax, so consult your tax professional for guidance on your specific tax circumstances if necessary.

Read More

• W-4 Form: Tax Withholding Tips to Optimize Your Taxes This Year
• New 2026 Income Tax Brackets Are Set: Will Your Rate Change?
• Three Popular Tax Breaks Are Gone for Good in 2026
• Standard Deduction 2026 Amounts Are Here

How much you pay to the IRS is an important question on a lot of people’s minds when they retire.

Many might expect their retirement income to be taxed in the same way as their employment pay. Others might have heard that there’s a specific age where you stop paying federal taxes on certain types of income, like Social Security benefits.

If you take this quick quiz, you could be surprised about how your retirement income is actually taxed on a federal level.

Also, check out Kiplinger’s articles on retirement taxes at the end to further deepen your understanding of this important tax topic.

More on Retirement Taxes

• Here’s How the IRS Taxes Retirement Income
• How to Calculate Taxes on Social Security Benefits
• Retirement Taxes: How All 50 States Tax Retirees
• SECURE 2.0 Act Summary: New Retirement Savings Changes to Know
• Estate Tax Quiz: Can You Pass the Test on the 40% Federal Rate?