5 Tax Changes for 2026 That May Impact Your Refund and 3 Ways to Prepare

A major wave of tax changes is coming in 2026, and some Americans may see smaller refunds as a result. With inflation adjustments, changing provisions, and new rules under the One Big Beautiful Bill (OBBB), the tax landscape may look very different. Understanding these changes now can help you build wealth and avoid surprises during next year's filing season. Here are some key updates worth knowing about.

The IRS announced new tax brackets for 2026

The IRS recently released inflation-adjusted tax brackets for 2026, which determine how much of your income is taxed at each level.

Here are the updated marginal rates:

These shifts reflect inflation indexing but can still result in "bracket creep," where rising wages push taxpayers into higher brackets even if their purchasing power hasn't improved. That could potentially reduce your refund if you don't adjust your withholding.

The standard deduction is increasing

The standard deduction will rise in 2026 under OBBB adjustments. Here are the new amounts:

Single or married filing separately:

• 2025: $15,000
• 2026: $16,100

Married filing jointly or surviving spouses:

• 2025: $30,000

• 2026: $32,200

Head of household:

• 2025: $21,900
• 2026: $22,500

While a higher deduction reduces taxable income, these increases are modest. Some taxpayers may still owe more if they face higher taxable income under the updated rules, which could also potentially lead to a smaller tax refund.

The 2017 TCJA tax cuts were made permanent under the OBBB

Many parts of the 2017 Tax Cuts and Jobs Act (TCJA) were originally scheduled to expire after 2025, but the One Big Beautiful Bill (OBBB) locks them in for good. This includes keeping the current seven-bracket tax system, continuing the expanded standard deduction, and maintaining the updated child tax credit structure. The OBBB also permanently removes personal exemptions, which had been eliminated under the TCJA.

Making these provisions permanent means taxpayers will continue operating under rules that were supposed to sunset, affecting long-term planning for many households, which could impact how big (or how small) your tax refund will be in 2026.

The child tax credit is changing

Beginning in 2026, the child tax credit will rise from $2,000 per qualifying child to $2,200 per qualifying child per qualifying child, and it will increase annually with inflation going forward. Higher earners will still see the credit phase out once income exceeds $200,000 for single filers or $400,000 for married couples filing jointly.

These income thresholds determine how quickly the credit decreases as earnings rise. Conversely, you'll need to earn enough to qualify for the tax credit at all. Families should review their eligibility because even small income changes can influence their tax credit eligibility, the size of their credit, and the amount of their tax refund.

Inflation could reduce the real value of your tax refund

Even if your refund amount stays the same on paper, rising inflation can erode what that money is actually worth. When prices for essentials like groceries, utilities, and transportation increase faster than income or tax adjustments, your refund won't stretch as far as it did in prior years.

This means a refund that once covered several weeks of expenses may only cover a fraction of that in a higher-inflation environment. Planning ahead — such as revisiting your budget or adjusting withholdings — can help preserve your purchasing power if inflation continues climbing.

How to plan for a potentially smaller tax refund

If your refund could shrink in 2026, preparing now can help reduce stress later and keep your budget on track.

Review your tax withholding

Updating your W-4 can prevent owing money next April. Adjusting withholding early gives your paycheck time to rebalance gradually. A midyear check-in can also help you spot changes in income or deductions before they lead to an unexpected tax bill.

Increase your savings cushion

With more tax uncertainty ahead, building a stronger emergency fund can protect you if your refund is smaller than expected. A larger cash buffer also reduces the likelihood of relying on high-interest debt when expenses spike or tax liabilities shift.

Use tax-advantaged accounts wisely

Maximize retirement contributions or consider HSAs if eligible. These accounts can lower your taxable income and offset the changing tax rules. Contributing consistently throughout the year helps smooth out market fluctuations and can help maximize long-term growth potential.

Bottom line

The 2026 tax season is slated to bring tax changes to many Americans, especially as OBBB changes roll out. Reviewing the new brackets, deduction changes, and credit adjustments now can help you keep more cash in your wallet and avoid year-end surprises.

By planning ahead and understanding how these shifts affect your situation, you can file with confidence and stay on track financially.

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