January 13, 2026
What You Need to Know for This Tax Season
By Elliot Palabe, CFP®
Introduction
As tax season approaches, understanding the current rules—and how they differ from prior years—can help you avoid surprises and make more informed financial decisions. While some tax provisions remain familiar, recent legislation and annual inflation adjustments have introduced meaningful changes that may affect your deductions, credits, and overall tax liability.
Rather than simply repeating last year’s approach, this filing season presents an opportunity to reassess your tax strategy in the context of your broader financial plan. The following article highlights key updates for the 2025 tax year (returns filed in 2026) that individuals and families should be aware of.
1. Inflation-Adjusted Tax Brackets and Standard Deduction
Each year, the IRS adjusts income tax brackets and the standard deduction to account for inflation¹.
For the 2025 tax year, the standard deduction has increased to:
- $15,750 for single filers and married filing separately
- $31,500 for married couples filing jointly
- $23,625 for heads of household¹
These increases reduce taxable income for many households and may impact whether itemizing deductions continues to make sense.
What this means for you:
Even modest inflation adjustments can affect marginal tax brackets, withholding accuracy, and estimated tax payments. Reviewing income and deductions holistically can help prevent under- or over-withholding.
2. Permanent Tax-Law Changes Under the One Big Beautiful Bill Act
The One Big Beautiful Bill Act (OBBBA), enacted in July 2025, made permanent several individual tax provisions that were previously scheduled to expire². These changes provide greater long-term clarity for tax planning.
Key provisions affecting this tax season include:
- Permanent individual income-tax rate structures²
- Permanently higher standard deductions²
- Continued elevated federal estate and gift tax exemptions³
What this means for you:
The urgency to accelerate income or deductions before an assumed sunset has shifted. Planning now focuses more on optimization and long-term tax efficiency rather than expiration deadlines.
3. Expanded Child Tax Credit
For the 2025 tax year, the Child Tax Credit has increased to $2,200 per qualifying child, up from $2,000, and is indexed for inflation going forward⁴. Income phase-out thresholds remain in place, and eligibility rules continue to apply.
What this means for you:
Families may see modestly higher credits for the 2025 tax year and going forward, as this amount is now indexed for inflation.
4. Higher State and Local Tax (SALT) Deduction Cap
The OBBBA temporarily increased the SALT deduction cap from $10,000 to $40,000 for certain taxpayers through 2029⁵. This change may significantly affect individuals in higher-tax states who itemize deductions.
What this means for you:
For some taxpayers, itemizing deductions may again provide greater tax savings than the standard deduction, particularly when combined with mortgage interest and charitable contributions.
5. New Deductions for Workers and Older Taxpayers
The new law introduced additional deductions aimed at working Americans and retirees.
These include:
- A deduction for qualified overtime compensation, subject to income limits⁶
- An enhanced additional deduction for taxpayers age 65 and older, providing up to $6,000 per individual beyond the standard deduction⁶
What this means for you:
These provisions may reduce taxable income even for taxpayers who do not itemize, but eligibility requirements and reporting accuracy are critical.
6. Filing Season Timing and Administrative Updates
The IRS accepts 2025 tax returns in late January 2026, with a filing deadline of April 15, 2026⁷. Taxpayers should ensure all income documents—such as Forms W-2 and 1099—are accurate and complete before filing.
Additionally, new reporting requirements for certain income categories continue to expand, reinforcing the importance of careful review before submission⁸.
What this means for you:
Early preparation and document verification can help reduce delays, notices, or amended returns.
Putting These Changes in Context
This tax season underscores the importance of integrating tax decisions into a broader financial plan. With higher deductions, expanded credits, and permanent tax-law changes now in place, thoughtful planning can help reduce lifetime tax exposure—not just this year’s bill.
At Palabe Wealth, we help clients coordinate tax strategies with retirement planning, investment management, and income decisions to create clarity and confidence year-round.
If you would like to review how these changes affect your situation, schedule a 15-minute introductory phone call by contacting us directly at (847) 249-6600.
References
- Internal Revenue Service, Inflation Adjustments for Tax Year 2025, Revenue Procedure 2024-40.
- Internal Revenue Service, Summary of the One Big Beautiful Bill Act, July 2025.
- Sikich LLP, OBBBA Extends Federal Estate and Gift Lifetime Exclusion, August 2025.
- Internal Revenue Service, Child Tax Credit Updates for 2025, IRS Notice 2025-XX.
- Congress.gov, State and Local Tax Deduction Provisions Under the OBBBA, 2025.
- Internal Revenue Service, Tax Deductions for Working Americans and Seniors, July 2025.
- Internal Revenue Service, Filing Season Start and Deadline for 2026, January 2026.
- IRS Publication 525, Taxable and Nontaxable Income, updated 2025.
Disclosures
This material is for general informational purposes only and is not intended to provide specific tax, legal, or investment advice. Individuals should consult with their tax advisor, financial professional, or attorney regarding their unique circumstances. Past performance is no guarantee of future results. Investing involves risk, including possible loss of principal.
Securities and advisory services offered through LPL Financial, a registered investment advisor and member FINRA/SIPC. Palabe Wealth and LPL Financial are separate entities.
Elliot Palabe, CFP®
Elliot Palabe is a Wealth Advisor at Palabe Wealth, where he plays a pivotal role in designing comprehensive retirement plans and working directly with clients to address their financial needs. Elliot's expertise lies in his ability to combine personalized Financial Planning with strategic Tax Planning, helping to ensure that each client's financial strategy is both optimized and aligned with their individual goals and circumstances.
Elliot has a solid educational foundation that underpins his professional acumen, as he holds a Bachelor’s degree in Finance from the Foster College of Business at Bradley University. His academic background has provided him with a deep understanding of financial markets, investment strategies, and economic principles.
Elliot is a CERTIFIED FINANCIAL PLANNER™ professional. He holds several critical financial industry licenses, including the Series 65, 63, 6, and SIE, held through LPL Financial. These qualifications enable him to offer comprehensive investment guidance and demonstrate his thorough knowledge of the financial services industry.
A specialist in the use of sophisticated financial planning and tax planning software, Elliot brings a technological edge to his approach. This expertise allows him to create detailed and highly personalized financial plans that can adapt to changing market conditions and tax environments. By leveraging cutting-edge technology, Elliot ensures that Palabe Wealth's clients receive the most accurate, up-to-date, and effective financial advice possible.
His work is instrumental in helping clients navigate the complexities of financial planning and retirement preparation, helping to ensure they are well-positioned to pursue their long-term financial objectives.
Outside of work, Elliot competes in pickleball. The game’s blend of strategy and precision reflects the same qualities he brings to financial advising - thoughtful planning, attention to detail, and focus.
