Get ready for a potential tax refund boost in 2026! The new IRS rules, part of President Trump's "One Big Beautiful Bill Act," promise a significant financial advantage for taxpayers. But here's the catch: it's not as simple as it seems, and there are some controversial aspects to consider.
According to the Tax Foundation, the average taxpayer can expect a refund increase of $300 to $1,000 compared to the previous year. This is due to several new tax breaks, including no taxes on tips, overtime, and car loan interest, as well as increased deductions for state and local taxes, parents, and individuals aged 65 and older.
However, the rules are intricate and filled with exceptions. Before you can claim your refund, there's a new form you must complete: Schedule 1-A. This form is not yet available, but stay tuned for updates.
While the average taxpayer benefits, the tax breaks have a downside. The Congressional Budget Office warns that these measures will contribute to a ballooning national deficit over the next decade. Furthermore, the act disproportionately benefits big businesses and the wealthy, while cutting health care and food aid for the poor and elderly.
Oregon, in particular, is expected to lose significant tax revenue due to its practice of automatically adopting federal tax cuts.
So, what do you need to know for your 2025 taxes?
The tax filing season begins on an unspecified date in January. Oregon will accept state tax returns on the same day as the federal government. Last year, it was January 27th.
Say goodbye to paper checks! Most refunds will be direct-deposited, so ensure you have a bank account and its routing information.
The average refund last year was $3,052, but with the new tax breaks, you could see an increase of $300 to $1,000.
The standard deduction for 2025 has increased by $750 for single filers and married individuals filing separately, and by $1,500 for married couples filing jointly.
Waiters, bartenders, and others who receive tips regularly can avoid taxes on up to $25,000 of tips, provided their modified adjusted gross income is below certain thresholds.
Single filers can avoid taxes on up to $12,500 of overtime income, while joint filers can deduct up to $25,000.
Taxpayers who bought a new car or certain other vehicles for personal use can deduct up to $10,000 in auto loan interest per year, with income restrictions.
The One Big Beautiful Bill Act allows a much larger deduction for state and local taxes (SALT), up to $40,000, preventing "double taxation" for wealthier taxpayers who are more likely to pay higher income and property taxes.
The Child Tax Credit has increased to $2,200 per child for the 2025 tax year.
Many individuals aged 65 and older can claim an additional $6,000 deduction (or $12,000 for married couples), with income-based phase-outs.
Lastly, Oregon taxpayers will receive the fourth-largest kicker refund in state history, but only after filing their 2025 state taxes and having filed a 2024 state tax return. You can calculate your exact refund amount on the Oregon Department of Revenue's website.
So, are these tax changes a boon for the average taxpayer, or do they favor the wealthy at the expense of social safety nets? What are your thoughts on the potential trade-offs? Feel free to share your opinions in the comments!
