The Working Families Tax Cuts have expanded deductions and credits for 2026, delivering broader tax relief to American workers and families through several new and enhanced provisions that take effect this year.
The law eliminates taxes on tips for workers who regularly receive them, allowing those workers to deduct up to $25,000 annually in tips from their taxable income, according to the Internal Revenue Service. Similarly, a new deduction for overtime compensation lets workers deduct up to $12,500 per year, or $25,000 for joint filers, in qualified overtime pay, effective for 2025 through 2028.
Families with children benefit from an increased Child Tax Credit, which rose from $2,000 to $2,200 per qualifying child for 2025 and 2026, according to the IRS. Seniors age 65 and older can claim an additional deduction of $6,000 per individual ($12,000 for married couples filing jointly) for 2025 through 2028, providing targeted relief for retirees.
The changes have already produced measurable results during the 2026 filing season. According to the U.S. Department of the Treasury, Americans received an average refund of $3,300, with total refunds reaching $325 billion for American families. The National Taxpayers Union reported average tax refunds of $3,521 per taxpayer, marking an 11 percent increase from the prior year.
The law also includes provisions benefiting workers who file taxes on a non-itemized basis. Nonitemizer single taxpayers can now deduct up to $1,000 in cash charitable donations annually, while married couples filing jointly can deduct up to $2,000, according to congressional sources. The standard deduction itself has been increased, with single filers seeing $15,750 and married couples filing jointly receiving $31,500 for the 2025 tax year, according to the National Association of Home Builders.
Additional provisions expand business deductions and investment incentives. The law provides a permanent 100-percent additional first-year depreciation deduction for qualified property acquired after January 19, 2025, and increases the Section 179 expensing limit from $1,000,000 to $2,500,000 for property placed in service in tax years beginning after December 31, 2024, according to the IRS. These changes aim to encourage capital investment and business growth.
The Working Families Tax Cuts also introduced Trump Accounts, a new savings vehicle for families. Parents and guardians can establish these accounts for eligible children, with the federal government making a one-time $1,000 contribution for each account. Individual and employer contributions are permitted up to $5,000 per year, with employers able to contribute up to $2,500 annually, according to IRS guidance. Funds must be invested in mutual funds or exchange-traded funds tracking a U.S. stock index such as the S&P 500, and withdrawals are generally restricted until the child turns 18.
While most provisions are permanent or extend through 2028, some are temporary. The deductions for tips and overtime expire after 2028, and the enhanced deduction for seniors also concludes in 2028, according to congressional sources. The law represents a significant expansion of tax relief aimed at working-class families, with the House Ways and Means Committee noting that working families earning between $15,000 and $30,000 will see their taxes cut by 21 percent, the largest reduction of any income group.
Sources
- Internal Revenue Service — comprehensive guidance on Working Families Tax Cuts provisions, deductions, and credits for 2026
- U.S. Department of the Treasury — first-year results showing $325 billion in total tax refunds and $3,300 average refund
- House Ways and Means Committee — tax relief impact data and income-group analysis
- National Taxpayers Union — filing season statistics reporting $3,521 average refund and 11% increase
- National Association of Home Builders — standard deduction amounts for 2025 tax year
- H&R Block — senior deduction details and tax reform changes
