Instead | How to estimate and maximize your 2026 tax refund

The 2026 tax filing season introduces significant changes under the One Big Beautiful Bill Act that directly affect how much money you can expect back from the IRS. With updated standard deductions, expanded child tax credits, and new exemptions on overtime and tip income, millions of taxpayers may see larger refunds this year compared to previous filing seasons. Understanding these changes and how they interact with your financial situation is essential to estimate your refund and identify every available tax-saving opportunity accurately.

A Traditional 401k contribution, a well-timed Tax loss harvesting move, or simply choosing the right filing status can mean the difference between a modest refund and thousands of additional dollars back in your pocket. This guide walks you through the updated 2026 tax figures, how refund estimators work, and proven strategies to maximize your return.

How the One Big Beautiful Bill Act changes your 2026 refund

The One Big Beautiful Bill Act, signed into law on July 4, 2025, made the Tax Cuts and Jobs Act provisions permanent and introduced several new tax benefits that affect refund calculations for the 2026 filing season. These changes represent the most significant tax law updates in years and could meaningfully increase the average American tax refund this year, with some analysts projecting families may see roughly $1,000 more compared to last year.

The updated standard deduction amounts reduce your taxable income before tax brackets are applied, meaning more of your earnings remain tax-free. For details on deduction eligibility, refer to IRS Publication 501, Dependents, Standard Deduction, and Filing Information.

2026 standard deduction amounts by filing status

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Key OBBBA changes that boost 2026 refunds include:

• The Child Tax Credit increased to $2,200 per qualifying child under age 17, with up to $1,700 refundable
• A new senior bonus deduction of up to $6,000 for taxpayers aged 65 and older, phasing out for modified adjusted gross income over $75,000 for single filers and $150,000 for joint filers
• Overtime pay exemptions from federal income tax for eligible workers through 2028
• Tip income exclusions for qualifying tipped employees
• SALT deduction cap raised to $40,400 for all filing statuses ($20,200 for married filing separately)

These provisions work together to lower taxable income and increase available credits, both of which directly increase your refund if you have had sufficient withholding throughout the year.

How does a tax refund estimator calculate your refund

A tax refund estimator determines your projected refund by comparing your total tax liability for the year against the amount you have already paid through paycheck withholding or estimated tax payments. The process involves several calculation steps that mirror how the IRS processes your actual return.

First, the estimator calculates your gross income from all sources, then subtracts above-the-line deductions such as Health savings account contributions and retirement plan deferrals to arrive at your adjusted gross income. Standard or itemized deductions further reduce this amount to your taxable income, which the estimator then runs through the 2026 tax brackets.

After calculating your total tax liability, the estimator subtracts any tax credits you qualify for, such as the Child & dependent tax credits and education credits. The final step compares this adjusted liability against your total payments through withholding and estimated taxes. If your payments exceed your liability, the difference becomes your refund.

Common tax credits that increase 2026 refunds

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What factors have the most significant impact on your refund amount

Your filing status affects every part of the refund calculation because it determines your standard deduction amount and the income thresholds for each tax bracket. Married couples should evaluate whether filing jointly or separately produces a better result, given their combined income and deduction situation.

Withholding accuracy is the most critical factor in determining the size of a refund. Taxpayers who have too little withheld face a balance due and potential underpayment penalties, while those with excess withholding receive larger refunds but effectively give the government an interest-free loan throughout the year. For detailed guidance on withholding calculations, see IRS Publication 505, Tax Withholding and Estimated Tax.

Dramatic life changes during the tax year can significantly affect your refund calculation. Marriage, the birth of a child, a home purchase, job changes, and significant income fluctuations all shift your tax liability and should prompt an immediate review of your W-4 withholding elections.

Self-employment income adds complexity because it requires separate self-employment tax calculations and quarterly estimated tax payments. Business owners can reduce their overall liability through deductions like the Home office deduction and Meals deductions for qualifying business activities.

Investment income from dividends, capital gains, and interest also affects your refund differently than ordinary income does. Long-term capital gains receive preferential tax rates, while short-term gains are taxed at ordinary income rates.

Strategies to maximize your refund before the April deadline

Retirement account contributions offer some of the most powerful refund-boosting opportunities available. Traditional IRA contributions may be tax-deductible depending on your income level and employer plan coverage, and you have until the April 15, 2026, filing deadline to make contributions that count toward the 2025 tax year.

Bunching itemized deductions into alternating years increases your total tax savings when your deductions hover near the standard deduction threshold. This strategy involves accelerating charitable contributions, medical expenses, or state tax payments into a single year to exceed the standard deduction, then taking the standard deduction in the alternate year.

1. Review all available deductions against the standard deduction for your filing status.
2. Calculate whether itemizing produces a larger total deduction than the standard amount.
3. Identify deductible expenses that can be accelerated or deferred to maximize the benefit.
4. Ensure proper documentation exists for all claimed deductions before filing.

Real estate strategies provide additional tax advantages for homeowners. The Sell your home exclusion allows taxpayers to exclude up to $250,000 in capital gains from the sale of a primary residence, or $500,000 for married couples filing jointly. For full eligibility details, see IRS Publication 523, Selling Your Home.

Business owners should also review their Travel expenses and vehicle expense records to ensure all qualifying deductions are captured before filing, as these commonly overlooked business costs can significantly increase refund amounts.

Common refund estimator mistakes to avoid

Failing to include all income sources is the most frequent error that leads to inaccurate refund estimates. Taxpayers often forget to account for unemployment compensation, gambling winnings, cancelled debt, or income from side businesses when calculating their expected refund.

Incorrect selection of filing status can dramatically skew your calculations, as each status has different standard deductions and tax bracket thresholds. Married couples must carefully evaluate whether filing jointly or separately yields a better result given their specific circumstances.

Overlooking available tax credits and deductions leaves money on the table. Many taxpayers miss credits they qualify for, including the Child traditional IRA contribution benefits when their children earn income, or Vehicle expenses deductions for business use of a personal automobile.

Other common mistakes that produce inaccurate estimates include:

• Using outdated 2024 or 2025 tax brackets and standard deduction amounts instead of the updated 2026 figures
• Forgetting to account for state tax refunds as taxable income on your federal return
• Miscalculating self-employment tax on business and freelance income
• Overlooking required minimum distributions from retirement accounts for taxpayers age 73 and older
• Failing to include tax withheld from investment accounts or retirement distributions

Timing differences between when you run an estimator and when you actually file also create discrepancies. Year-end bonuses, late-arriving 1099 forms, and fourth-quarter investment income may not be reflected in earlier estimates.

When should you adjust your withholding

Large refunds indicate excessive withholding that reduces your take-home pay throughout the year. While receiving a refund feels positive, it represents money the government held interest-free that you could have invested in a Roth 401k or used for other purposes throughout the year.

Owing taxes at filing time, especially if you owe more than $1,000, suggests insufficient withholding that may subject you to underpayment penalties. The IRS requires taxpayers to pay either 90% of the current year's tax liability or 100% of the prior year's liability through withholding or estimated payments to avoid these penalties.

Ideal withholding results in a small refund or balance due of less than $500, indicating your payments closely match your actual tax liability. This approach maximizes your cash flow throughout the year while avoiding interest charges.

Life events that should trigger an immediate withholding review include:

• Getting married or divorced during the tax year
• Having or adopting a child
• Purchasing a home or starting a new mortgage
• Changing jobs or taking on a second source of income
• Receiving a significant raise, bonus, or inheritance

Self-employed individuals and those with significant non-wage income must make quarterly estimated tax payments to avoid penalties. Refund estimators help determine the appropriate payment amounts based on projected annual income, and you can review your 2026 California State Tax Deadlines or other state-specific filing deadlines to ensure timely payments.

Unlock accurate refund calculations with advanced tax planning

Estimating your tax refund accurately requires understanding how income, deductions, credits, and withholding interact under the latest OBBBA tax provisions. The strategies outlined in this guide can help you identify missed opportunities and make informed financial decisions throughout the year.

Instead's comprehensive tax platform seamlessly integrates refund calculations with strategic tax planning tools that identify opportunities to reduce your tax liability through proven strategies tailored to your financial situation.

Instead's intelligent system analyzes your complete financial picture to recommend personalized tax strategies that maximize your refund potential while ensuring compliance with all current tax regulations and OBBBA provisions.

The Instead platform helps you track deductible expenses, optimize withholding levels, and implement tax-saving strategies throughout the year to achieve your financial goals. Discover how our tax savings features, tax reporting capabilities, and pricing plans can transform your tax planning approach.

Frequently asked questions

Q: How much will the average tax refund be in 2026?

A: The average American tax refund for the 2026 filing season is expected to increase significantly from previous years, with some analysts projecting families could see roughly $1,000 more compared to last year due to expanded deductions, higher child tax credits, and new OBBBA provisions, including overtime and tip income exclusions. Individual refund amounts vary significantly based on income, filing status, withholding accuracy, and eligible deductions and credits.

Q: How do OBBBA tax changes affect my 2026 refund?

A: The One Big Beautiful Bill Act increased the standard deduction, raised the Child Tax Credit to $2,200 per child, introduced a senior bonus deduction of up to $6,000, exempted qualifying overtime pay from federal income tax, and raised the SALT deduction cap to $40,400 for 2026. These changes collectively lower taxable income and increase available credits, which can significantly boost your refund if your withholding remained at prior-year levels.

Q: When is the best time to estimate my 2026 tax refund?

A: The best time to estimate your tax refund is after receiving all tax documents in late January or early February, though running quarterly estimates throughout the year helps with ongoing tax planning. The IRS began accepting e-filed returns on January 26, 2026, and most filers who e-file with direct deposit receive their refund within 10 to 21 days.

Q: What credits have the most significant impact on refund amounts in 2026?

A: The Earned Income Tax Credit (up to $8,231 for three or more qualifying children), Child Tax Credit ($2,200 per qualifying child), and education credits such as the American Opportunity Credit ($2,500 per student) typically have the most significant impact on refund amounts. Health savings account and retirement contribution deductions can also substantially increase refunds when you make qualifying contributions.

Q: Should I aim for a large refund or break even on my taxes?

A: Breaking even or receiving a small refund generally represents better financial planning than large refunds because it maximizes your take-home pay throughout the year. A refund of over $1,000 suggests your withholding exceeds your actual tax liability, meaning the government held your money interest-free when you could have been investing or saving those funds.

Q: How do estimated tax payments affect my refund calculation?

A: Estimated tax payments made throughout the year reduce your tax liability just like paycheck withholding. These payments are credited against your total tax owed, and any excess results in a refund. Self-employed individuals and taxpayers with significant non-wage income should use quarterly estimated payments to avoid underpayment penalties while maintaining accurate refund projections.