\n<\/p>\n
US taxpayers will have a \u201cgigantic refund year in the first quarter\u201d of 2026, the treasury secretary, Scott Bessent, recently said in an interview.<\/p>\n
Given all the untruths that come out of the current administration, you wouldn\u2019t be blamed if you don\u2019t believe him. But you should. This year, there will be a significant amount of tax refunds. Why? Well, it\u2019s not tariff cash. It\u2019s because many people overpaid their taxes this year.<\/p>\n
For example, service workers who receive tips will be getting refunds. Thanks to Donald Trump\u2019s One Big Beautiful Bill Act (OBBBA), a new provision allows them to deduct up to $25,000 per individual for any tipped income they received during the year. But I bet even when the bill passed, few changed their withholdings to reflect this deduction. If you\u2019re part of that group, then it\u2019s very likely you had too much withheld \u2026 and paid too much tax. When you file your 2025 return between now and 15 April \u2013 and take advantage of this deduction \u2013 you\u2019ll find out you owed less taxes than you estimated. Hence the refund.<\/p>\n
The same goes for workers receiving overtime pay. There\u2019s a new deduction that will allow individuals to deduct up to $12,500 of their overtime pay received in 2025 (it\u2019s $25,000 for joint filers). Similarly for service workers, it\u2019s a deduction you take when you file your 2025 returns. I\u2019m betting if you received overtime during the year, your withholdings didn\u2019t reflect that either. So you\u2019ll probably be getting money back on the taxes you overpaid.<\/p>\n
There are caveats. State and local taxes may both still apply. Employment taxes \u2013 social security and Medicare \u2013 aren\u2019t affected. Both deductions start to phase out if you make more than $150,000. Not all tipped workers are eligible (here\u2019s a list to check). Thanks to the shutdown, the IRS didn\u2019t have time to update W-2 wage reporting forms to reflect these changes. And employers weren\u2019t given much guidance as to how to calculate these amounts.<\/p>\n
It\u2019s not just people who received tips and overtime that have new tax benefits<\/p>\n
For example, did you know that your overtime wage eligible for the deduction would only be the differential between your normal hourly rate and your overtime rate? So if you got paid time and a half for overtime and your normal rate is $20 an hour, you would receive $30 an hour \u2013 but your deduction is on the $10 difference. I\u2019m not sure all employers will do these calculations correctly, so be careful \u2013 any mistakes are the taxpayer\u2019s responsibility.<\/p>\n
It\u2019s not just people who received tips and overtime that have new tax benefits.<\/p>\n
Older adults \u2013 subject to some limitations \u2013 will get an additional $6,000 deduction this year over and above their standard deduction. If you run a small business, you\u2019ll receive higher deductions for first-year depreciation and research and development costs. If you haven\u2019t taken advantage already, you can contribute more to a flexible savings account (which reduces your taxable income) and contribute up to $5,000 to a \u201cTrump savings account\u201d this year and annually, which, while not reducing your income, will allow your newborn to accrue earnings tax-free through the age of 18 and then withdraw the funds without penalty.<\/p>\n
These deductions aren\u2019t one-offs. Which is why it\u2019s important that if you get a refund this year, make sure to adjust your withholdings for 2026 to reflect your updated taxable income for the current year. This way, you can increase your net pay and put more money in your pocket during the year instead of waiting until you file your 2026 returns in 2027.<\/p>\n
There are many critics of the OBBBA and they legitimately argue that the bill has many downsides \u2013 increasing deficits, taking away critical benefits and reducing spending in needed areas are among the biggest. Those issues aside, the bill does include significant tax benefits for many, benefits that may hopefully make a difference to both consumers and the economy at large.<\/p>\n
The OBBBA is law. However you feel about it, take advantage. File your 2025 tax returns as soon as possible. Get your refund. It\u2019s your money.<\/p>\n","protected":false},"excerpt":{"rendered":"
US taxpayers will have a \u201cgigantic refund year in the first quarter\u201d of 2026, the treasury secretary, Scott Bessent, recently said in an interview. Given all the untruths that come out of the current administration, you wouldn\u2019t be blamed if you don\u2019t believe him. But you should. This year, there will be a significant amount<\/p>\n","protected":false},"author":1,"featured_media":40276,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[49],"tags":[1406,558,613,1407,21678,1569],"class_list":{"0":"post-40275","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-gene","9":"tag-government","10":"tag-heres","11":"tag-marks","12":"tag-paycheck","13":"tag-year"},"_links":{"self":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/40275","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=40275"}],"version-history":[{"count":0,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/40275\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/media\/40276"}],"wp:attachment":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=40275"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=40275"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=40275"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}