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Taxes

Higher 2026 Federal Refunds Driven by Standard Deduction Child Tax Credit and SALT Changes

The April 15, 2026, tax deadline introduces new opportunities for higher refunds through expanded credits and deductions. Key changes include a $40,000 SALT cap and specialized deductions for seniors and overtime workers. Immigrants and visa holders should verify residency status and filing requirements early to ensure compliance and optimize their 2025 tax returns.

Last updated: January 26, 2026 4:23 pm
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Key Takeaways
→The federal tax return deadline is Wednesday, April 15, 2026, for most residents and nonresident workers.
→Average refunds may increase significantly due to major 2025 rule changes affecting deductions and credits.
→Key updates include a $40,000 SALT cap and new deductions for seniors, tips, and overtime pay.

If you are a U.S. tax resident (including many green card holders and H-1B/L-1 workers) or a nonresident who had U.S. income in 2025, your federal return is generally due Wednesday, April 15, 2026. This filing season is the first time many taxpayers will see mid-2025 law changes show up on a return, which can change refunds.

📅 Deadline Alert: Miss the April 15, 2026 filing deadline and you may lose access to timely refunds and face penalties and interest if you owe.

Higher 2026 Federal Refunds Driven by Standard Deduction Child Tax Credit and SALT Changes
Higher 2026 Federal Refunds Driven by Standard Deduction Child Tax Credit and SALT Changes

Deadline summary (2025 return filed in 2026)

Tax event Who it affects Deadline Extension available
File Form 1040 or 1040-NR (tax year 2025) Most filers April 15, 2026 Yes, to Oct. 15, 2026 via Form 4868
Automatic expat filing delay U.S. citizens/residents living abroad on April 15 June 15, 2026 Yes, to Oct. 15, 2026 via Form 4868
Pay tax due (even with extension) Anyone who owes April 15, 2026 No (late payment interest applies)
FBAR (FinCEN 114) If foreign accounts topped $10,000 aggregate at any time April 15, 2026 Automatic to Oct. 15, 2026
→ Note
A larger refund usually means you overpaid through withholding or estimated payments. Before celebrating, check whether your paycheck withholding changed—getting a smaller refund can still be better if your take-home pay increased all year.

If you owe tax and file late, the IRS can assess a failure-to-file penalty and a failure-to-pay penalty, plus interest. If you are due a refund, you typically avoid those penalties, but filing late can delay your money.

Filing late may also complicate immigration-related paperwork that asks for tax returns.

For filing basics for immigrants, start with IRS Publication 519 and the IRS international taxpayers page.

Disaster relief and special circumstances

If you live in a federally declared disaster area, the IRS may postpone filing and payment deadlines automatically. Relief varies by event and county.

→ Analyst Note
If you’re claiming the Child Tax Credit, confirm each child’s name/SSN matches the Social Security card and keep school/medical records showing U.S. residency. Mismatches and missing documentation are common reasons credits get delayed or reduced.

Check the IRS newsroom for current disaster extensions before you file.

1) Overview: why 2026-season refunds may look larger (but aren’t guaranteed)

Some analysts estimate average refunds could rise by roughly “about $1,000” this season due to multiple rule changes. That figure is not a promise.

SALT cap snapshot: expansion, annual adjustment, and sunset
$10,000 Prior SALT cap
$40,000 Expanded SALT cap for 2025 returns
1% Cap adjustment rate annually through 2029
$10,000 Reversion after 2029: returns to

Your refund depends on withholding, credits, deductions, and your total tax. A refund can rise for two main reasons: your tax went down because deductions or credits increased, or your withholding stayed high even though your final tax dropped.

Seven major items are driving the change for many households: Standard Deduction increases, Child Tax Credit expansion, SALT cap expansion for itemizers, plus four new deductions enacted in July 2025 aimed at seniors, tipped workers, overtime earners, and qualifying car borrowers. These changes affect 2025 returns filed in early 2026.

→ Important Notice
Don’t assume “tips” or “overtime” deductions apply automatically. Save year-end pay statements and employer summaries that separate base wages, overtime premium, and reported tips. Unsupported amounts can trigger IRS correspondence and delay refunds.

2) Standard Deduction increases

The Standard Deduction reduces taxable income for people who do not itemize. Inflation adjustments matter because even small increases can lower tax when your paycheck withholding did not change.

For 2025, the standard deduction is $15,750 (single), $31,500 (married filing jointly), and $23,625 (head of household). For tax year 2026 (filed in 2027), it rises to $16,100, $32,200, and $24,150.

Who often benefits most:

  • W-2 employees with limited deductions
  • Renters
  • New immigrants without a long U.S. credit or mortgage history
  • People who give modestly to charity

Itemize vs. standard: You generally choose whichever is larger. A higher standard deduction can make itemizing less common, even in higher-tax states. Itemizers should still compare, especially if the SALT cap increase applies.

Immigration note: many nonresident aliens cannot claim the standard deduction (with limited exceptions, such as certain students from India under treaty rules). See Pub. 519 for residency and deduction rules.

3) Child Tax Credit expansion

The Child Tax Credit (CTC) is powerful because it reduces tax dollar-for-dollar. A higher maximum credit can also lift refunds for families whose withholding stayed the same.

For 2025 returns, the maximum CTC increased by $200, and up to about $1,700 can be refundable for eligible families through the “additional child tax credit” concept.

Common eligibility checks to confirm before you file:

  • The child meets the qualifying child tests (age, relationship, residency, and support).
  • Social Security number rules are met where required for the credit.
  • Your filing status and income put you within the credit’s allowed range.

Immigration note: If you are a dual-status filer or a nonresident filing Form 1040-NR, CTC eligibility can differ. Review Pub. 519 and consider professional help if you changed status during 2025.

4) SALT deduction cap expansion

SALT is the itemized deduction for state and local income (or sales) taxes plus property taxes. It only helps if you itemize on Schedule A.

For 2025 returns, the SALT cap increased from $10,000 to $40,000. The cap rises by 1% per year through 2029, then reverts to $10,000 after 2029 as described in the change.

This matters most for homeowners in high-tax, high-cost areas, especially married joint filers with large property tax bills. It can also change planning. Some taxpayers “bunch” deductions into one year to make itemizing worthwhile, then take the standard deduction the next year.

5) New deductions for specific groups (OBBB changes)

A July 2025 law created four new deductions that may first show up on 2025 returns filed in 2026. Deductions reduce taxable income. Credits reduce tax directly.

The new deductions target:

  • Seniors age 65+ (an extra $6,000 deduction, up to $12,000 for joint filers, through 2028)
  • Tipped workers (up to $25,000 of tips)
  • Overtime earners (up to $12,500 per return, or $25,000 for joint filers)
  • Qualifying car loan interest (interest on eligible loans)

Documentation to gather now:

  • Pay stubs and year-end Form W-2
  • Employer tip records and reports
  • Time-and-attendance or payroll records showing overtime
  • Loan statements showing interest paid and vehicle/loan details
Warning

Deductions and credits are different. A $1,000 deduction does not equal $1,000 back. It reduces taxable income, which reduces tax based on your bracket.

6) Timeline and practical steps for immigrants and visa holders

These changes were enacted in July 2025. They show up when you file 2025 returns in early 2026. You may see a different refund even if your income stayed steady.

Action steps before you file:

  • Confirm your U.S. tax residency under the green card test or substantial presence test (Pub. 519).
  • Review withholding and consider updating Form W-4 for 2026 if your 2025 refund surprised you.
  • Keep a folder for proof of children’s residency, pay records, and deductible expenses.
  • If you held foreign accounts, check whether FBAR applies. Filing is separate from your tax return.

Action items and preparation tips

  1. File by April 15, 2026. Or file Form 4868 and pay any expected balance by April 15.
  2. If you are abroad, confirm whether the June 15, 2026 automatic extension applies, but pay by April 15 to limit interest.
  3. If you changed visa status in 2025, (for example, F-1 to H-1B), ask a CPA about dual-status filing and credit eligibility.
  4. Use IRS forms and publications: the IRS forms and publications page to pull the right year’s forms and instructions.
Warning

This article is for informational purposes only and does not constitute tax, legal, or financial advice. Tax situations vary based on individual circumstances. Consult a qualified tax professional or CPA for guidance specific to your situation.

Learn Today
Standard Deduction
A flat dollar amount that reduces the income on which you are taxed, available to those who do not itemize.
SALT Cap
The limit on the amount of state and local taxes that taxpayers can deduct from their federal taxable income.
FBAR
Foreign Bank and Financial Accounts Report, required if the aggregate value of foreign accounts exceeds $10,000.
Dual-status Filer
A taxpayer who is both a nonresident and a resident alien in the same tax year, common during visa transitions.
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Shashank Singh
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As a Breaking News Reporter at VisaVerge.com, Shashank Singh is dedicated to delivering timely and accurate news on the latest developments in immigration and travel. His quick response to emerging stories and ability to present complex information in an understandable format makes him a valuable asset. Shashank's reporting keeps VisaVerge's readers at the forefront of the most current and impactful news in the field.
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