Q1 2026 Tax Update: What You Need to Know

1. New Tax Law Changes Are Now in Effect

The biggest driver of change this year is the One Big Beautiful Bill Act, passed in mid-2025 and now impacting 2025 returns (filed in 2026).

Key highlights include:

• Expanded standard deductions and updated tax brackets

• New deductions for tips, overtime, and seniors

• Increased Child Tax Credit and adjustments to SALT deductions

• Permanent extension of many prior tax cuts

These changes are already leading to larger average refunds for many taxpayers. ()

What this means for you:
Most taxpayers will see some level of tax relief—but only if they properly claim the new deductions. This is where good bookkeeping and proactive tax planning matter.

2. Refunds Are Up in 2026

Early IRS data shows that the average tax refund is up over 11%, with many taxpayers receiving significantly more than last year. ()

This increase is largely due to:

• New deductions from recent legislation

• Over-withholding during 2025

• Inflation-adjusted tax brackets

Pro insight:
A bigger refund isn’t always a win—it may mean you gave the IRS an interest-free loan. Now is a good time to revisit your withholdings for the rest of 2026.

3. New Deductions & Forms (Including Schedule 1-A)

The IRS introduced Schedule 1-A to help taxpayers claim new deductions created under recent law changes. ()

This includes deductions tied to:

• Tips

• Overtime income

• Certain business and gig economy expenses

What this means:
Tax prep is getting more complex, not less. Missing one of these new deductions could leave money on the table.

4. Capital Gains Thresholds Increased

For investors, 2026 brought updated capital gains tax thresholds:

• 0% rate now applies to higher income levels

• 15% and 20% brackets have also increased

This gives investors more room to realize gains at lower tax rates. ()

Planning opportunity:
Strategic selling (or “tax gain harvesting”) could be more beneficial this year depending on your income.

5. Retirement Contribution Limits Increased

Inflation adjustments continue to benefit retirement savers:

• 401(k) contribution limit increased to $24,500

• IRA contribution limit increased to $7,500 ()

Why this matters:
This is one of the easiest ways to reduce taxable income while building long-term wealth.

6. Increased IRS Focus on Scams

With new tax laws comes confusion—and scammers are taking advantage.

The IRS has issued warnings about:

• Fake tax calculators

• Fraudulent refund promises

• Phishing attempts tied to new deductions ()

Rule of thumb:
If it sounds too good to be true (especially “guaranteed refunds”), it probably is.

7. Enforcement Shifts & Compliance Risks

There are also changes happening behind the scenes:

• DOJ restructuring may impact how tax crimes are prosecuted

• IRS staffing changes could shift enforcement priorities ()

At the same time, some individuals are promoting “tax strikes”—which experts warn can lead to serious penalties and legal consequences. ()

Bottom line:
Compliance still matters—and the risks of ignoring tax obligations remain high.

Final Thoughts

Q1 of 2026 has already brought significant changes to the tax landscape. The opportunities are real—but so are the risks.

If you take away anything from this update, it’s this:

• Tax laws are getting more complex

• Planning matters more than ever

• Having clean, accurate books is no longer optional

At Texas Iron Ledger, our goal is simple: give you clarity, confidence, and control over your numbers—so you can focus on growing your business.

Need Help Navigating These Changes?

If you’re unsure how these updates affect your situation, now is the time to get ahead of it—not after the deadline.

Reach out and let’s get your books dialed in.