It’s tax time, and boy are there a lot of things, big and small, you should know about filing this year.

There were a lot of changes with the tax bill pass last summer. On top of it, with the huge staffing cuts at the Internal Revenue Service this year, things will be a little chaotic. Don’t just take my word for it – National Taxpayer Advocate Erin Collins told Congress Wednesday that this year’s tax filing is going to “present challenges” because of the job cuts and other disarray at the IRS. 

The best way to ensure you get your return is to file early, do it electronically and make sur eyou provide your direct deposit information.

Let’s take a look at the top things you should know when filing your taxes in the 2026 tax season.

Taxpayers beware

When researching this column every year, I rely heavily on the IRS webpages – after all, who knows more about what’s required to file taxes than the IRS? This year I’ve gotten many error messages as well as pages that haven’t been updated, or have severely cut back on the amount of information they offer.

Lack of information for taxpayers will lead many to simply rely on for-profit online tax filing companies. If you do, you may pay more than you should for what should be a free service.

If your federal taxes are simple, you shouldn’t have to pay a fee to file them. If your taxes require anything more than what used to be the good old 1040 E-Z form, it may benefit you to seek volunteer help when filing [check out the resources at the end of the column], or even hire a tax professional to sort it out for you, particularly if you’re self-employed [more on this below, too].

There’s one less online filing option this year

As I touched on earlier this month, the IRS’s new and popular online Direct File option has been scrapped. New Hampshire was one of the 12 pilot states for the service in 2024 – it at first focused on states without a state income tax, as well some that already had a streamlined government-sponsored online state tax filing system. Last year, Direct File expanded to 25 states.

Direct File answered a call from taxpayers for an IRS-based online filing system similar to for-profit online tax prep services that made things more efficient, cut down on fraud and used fewer IRS employees to get the job done. Despite its success, the Trump administration scrapped it. 

A reminder that filing your taxes is free with the U.S. government. Many third-party tax prep companies charge a fee, even if they lure you in with “free filing.” The Federal Trade Commission determined in 2024 that the majority of people who file their taxes using private online tax services end up paying a fee. Beware websites that look like they’re a government site, but are actually a commercial one that may offer free tax filing, but will charge you in the end. A good rule of thumb is if the site has .com at the end, it’s a commercial, for-profit site, not a nonprofit (.org) or government site (.gov).

The IRS Direct File program was launched, in part, because Turbo Tax, which had agreed to be part of the Free File program, was making it virtually impossible for people who qualified to find it or even know about it. Turbo Tax had to pay a $141 million settlement in 2022 for charging customers who would normally be eligible for the IRS Free File option. The IRS Free File option is open to any taxpayer who meets the income threshold, despite complications in their tax return.

How to file your taxes

IRS Free File. IRS Free File, not to be confused with now-gone Direct File, is for taxpayers with an adjusted gross income of $89,000 or less.  It is open to any taxpayer who meets the income level, regardless of complications in their tax return.

Even though it’s been around for a while, few taxpayers are aware of it. For-profit tax prep companies are supposed to inform customers they qualify for it, but have historically been lax in doing so.

The $89,000 adjusted gross income level requirement is for the tax year 2025, the one you are filing your taxes for this year. Adjusted gross income is total income – wages, dividends, capital gains, business and retirement income, tips, etc. – minus adjustments (self-employment tax, retirement account contributions, student loan interest, etc.). It is calculated before the standardized deduction or itemized deductions, which aren’t included in AGI.

IRS Free File doesn’t use IRS software. Instead, the IRS partners with tax preparation software companies that provide the guided tax preparation experience everyone who files online is familiar with. The IRS Free File webpage has a link that allows taxpayers to check out the “offers” from the software companies. Some of them offer free state tax preparation as well, which for most New Hampshire residents isn’t an issue. But if you do earn income from a state that has a state income tax, check that state for  its online income tax filing options so you don’t pay a fee to the tax prep service if you don’t have to. Maine has free online filing and so does Massachusetts. 

MilTax. Eligible members of the military and veterans can use this free online tax filing service through the U.S. Department of Defense. Like IRS Free File, it connects filers with private online tax services, that partner with the program. Unlike the IRS programs, it also allows up to three state tax returns. There are eligibility rules.

Paper forms or IRS Free Fillable Forms. If you’re of a certain age, you’re familiar with this old-school method of doing your taxes. You fill the forms out yourself and do the math. You can fill out the forms online, or go really old school and download them or pick them up at local federal government office or the post office, fill them in by hand and stick them in the mail. The online fillable forms are quicker than scaring up paper forms, but they don’t offer any more guidance, or help with the math, than the hard-copy ones do.

If you use a form, don’t expect to get your return quickly. With IRS staffing cuts, it’ll take a while since they are processed by hand. There are also concerns that paper forms will get lost or not processed. If you’ve filled it out wrong or forgot to include a W-2 or something, it’ll likely take months to get it all sorted out.

Online tax prep services. Many people use online tax services, such as TurboTax, H&R Block, Tax Act and more. They’re quick and easy and user-friendly. Just like IRS Direct File was. The one drawback is that “free” doesn’t always mean free. If your AGI is less than $89,000, you qualify for IRS Free File, which uses these platforms. Don’t pay a fee to file your federal tax form, even if it’s complicated, if you qualify for Free File. Go to the IRS Free File page to check it out. Be sure it’s the IRS page – it’ll end in .gov – because many tax prep services can fool you with a free filing page that’s actually a for-profit tax prep page. If you are self-employed or have other tax complications, these services will likely charge a fee.

No more paper checks

If you’ve been resisting getting your tax return by direct deposit [WHY???], you no longer have a choice. The federal government has stopped making payments by check, except for some very limited exceptions. You will be asked to provide direct deposit information on your return, and if you don’t, it’ll likely take a long time for your return to arrive. You don’t need a bank account – they’ll also send payments to a cash wallet, like PayPal, Venmo or Cash App.

If you don’t provide electronic payment information, you’ll  get a letter asking for it. If you respond saying you can’t or won’t provide it, the IRS will send you a paper check. Maybe. This whole process will end up taking months. The IRS says as much as six weeks, but that’s a guess on their part and I don’t believe much they say these days, given the lack of transparency on the IRS website regarding other things.

The good news is that if you take electronic payment, the IRS says you’ll get your money within 21 days. As always the earlier you file, the faster you’ll get the money. It’s not clear if the huge staffing cuts at the agency will delay payments beyond that.

Standardized deduction and itemizing deductions

Most people take the standardized deduction when they file their taxes, since it’s much more than what they’d get if they itemized deductions. This year it’s $15,750 for single filers, $31,500 for joint filers and $23,625 for head of household [the sole income-earner in a household of more than one person].

There are some deductions you can take even if take the standard. They all have rules and certain qualifications:

  • Alimony on divorce agreements finalized before 2019
  • Disaster losses related to federally declared disaster areas
  • Educator qualified classroom expenses up to $300
  • Health Savings Account (HSA) Contributions
  • Jury duty pay if it’s turned over to an employer
  • Penalties charged by banks for early withdrawal of accounts
  • Self-employment expenses, including 40(k) contributions and 50% of self-employment tax.
  • Student loan interest up to $2,500 on qualified loans.
  • Traditional IRA contributions

Itemizing your deductions usually doesn’t pay off for most people. They must add up to more than the standardized deduction, and many have qualifiers that make them worth less than they may seem at first.. They also make filing more complicated and can cause errors or questions that can delay a tax return. That said, if you do what to itemize, things you can itemize include:

  • State and local income or sales taxes.
  • Real estate and personal property taxes.
  • Home mortgage interest [this no longer includes home equity loans or lines of credit interest unless the money was used to repair or renovate or a home].
  • Personal casualty and theft losses from a federally declared disaster.
  • Gifts to a qualified charity.
  • Unreimbursed medical and dental expenses that exceed 7.5% of adjusted gross income.

There are also people who can’t take the standardized deduction and are required to itemize, including: 

  • Married individuals filing as “married filing separately” whose spouse itemizes deductions.
  • An individual filing a tax return for a period of less than 12 months because of a change in your annual accounting period.
  • Nonresident alien or a dual-status alien during the tax year. [The exception is nonresident aliens married to a U.S. citizen or resident alien at the end of the year, who choose to be treated as U.S. residents for tax purposes].
  • Filing as an estate or trust, common trust fund, or partnership.

Tax credit or tax deduction?

It’s important to know the difference between a tax credit and tax deduction, not only when filing your taxes, but when you’re living life and spending money and one is offered as an incentive.

A tax deduction reduces the amount of income you owe taxes on. It could make a big difference if it puts you in a lower tax bracket, or a smaller difference if it is just a chunk of money you don’t pay taxes on.

A tax credit is a bigger deal, because it reduces the amount of taxes you owe. In other words, once your taxable income is calculated, and how much you owe in taxes is determined, a tax credit is subtracted from that.

‘No tax’ on tips, overtime, Social Security

The so-called “One Big Beautiful Bill” that went into effect last year was touted as including no taxes on tips, overtime and Social Security. These are all tax deductions that are capped and have some rules if you’re to qualify.

Here’s what you need to know if you’ve earned income in any of those three areas.

No Taxes on Overtime. If you earned overtime this year, taxes were taken out just as they were before. The “no taxes on overtime” provision is actually a deduction on overtime earned up to $12,500. Anything more than that, you still pay taxes on.

The overtime must have been earned according to Fair Labor Standards Act rules – time and a half pay for work that extended past 40 hours in a week.

You don’t qualify for the deduction if:

  • Your job is overtime-exempt under FLSA rules
  • You have some kind of overtime deal with your employer that doesn’t conform to the federal rules
  • Your job is seasonal. For instance, you may work 50 hours a week at the ice cream stand from Memorial Day to Labor Day, and be paid time and a half for the extra 10 hours every week, but that overtime will still be taxed like it always was.

Federal deductions, like Social Security and Medicare, were still taken out of your overtime, and you don’t get that back. Well, you do, but it’s when you start collecting Social Security and Medicare benefits. If you earned waged from a state with a state income tax, you will still pay state tax on the overtime.

No Taxes on Tips. You must list your tips as part of your gross income to get this deduction. It’s capped at $25,000. To qualify, you must have reported your tips to your employer and have the required documentation. If you didn’t report your tips to your employer, and they don’t appear on a W-2 or 1099, you may not be able to claim the deduction. If your gross annual income is more than $150,000, the amount you can deduct phases down. 

This also only applies to “traditionally tipped professions” listed by the IRS. There are about 70 occupations listed.

No Taxes on Social Security. Social Security continued to be taxed and will be continue to be. “No taxes on Social Security” is actually a $6,000 deduction for anyone over 65 who files a tax return, whether they collect Social Security benefits or not. If you are younger than 65 and collect Social Security [you can start at 62], you don’t get the deduction.

This deduction benefits higher income-earners because of the way Social Security is taxed.

Social Security benefits are taxed if someone has earned income as well as a Social Security benefit. If the earned income combined with Social Security is less than $25,000, no taxes are owed, so the deduction has no benefit.

If the combination of Social Security benefit and earned income is between $25,000 and $34,000, then 50% of the Social Security benefit is taxed. If combined income is more than $34,000, then 85% of the Social Security benefit is taxed. So, the more you earn, the bigger impact the deduction has.

The deduction decreases for anyone whose modified adjusted gross income is more than $75,000.

New tax deductions

As we noted, a tax deduction reduces the amount of income you are taxed on. Besides the overtime, tips and Social Security deductions, there are also some new ones you may qualify for. And an old one that you just don’t…yet.

Charitable deductions. The 2017 Tax and Jobs Act passed under Trump I eliminated the charitable donations deduction for those who take the standardized deduction. The result of the elimination was that fewer people donated to charity. A $300 deduction was brought back in 2020, because of COVID, but that was only for one year.

The new tax bill allows charitable deductions for people who don’t itemize deductions, but not until the 2026 tax year. So, not the taxes you’re filing now.  Next year when you file, you can deduct up to $1,000 for charitable donations if you take the standardized deduction. If you itemize deductions, donations deducted must be more than 0.5% of your adjusted gross income.

State and Local Tax [SALT} Deduction. The maximum SALT deduction is temporarily increased from $10,000 to $40,000 for people with an adjusted gross income of $500,000 or less. That means you can deduct up to $40,000 in state and local taxes from your federal tax bill. This will benefit the 16.3% of New Hampshire residents who pay more than $10,000 in property taxes. In states with sales and income taxes, as well as property taxes, more people will benefit because of the additional taxes. But in every state, the beneficiaries are people who are wealthy enough to have high state and local tax bills. It reverts back to $10,000 in 2030.

U.S.-made auto loan deduction. Anyone who takes out a loan for a vehicle that had final assembly in the U.S. can deduct the interest for tax years 2025 through 2028. The vehicle must be a new personal-use vehicle. The maximum amount that can be deducted for those with an income below $100,000 is $10,000. The maximum decreases for higher incomes.

Affordable Care Act tax credit and recapture

The loss of the extended Advance Premium Tax Credit for the affordable care act is for 2026, so if you had ACA insurance last year, you will still get a 1095-A form in the mail or by email that you must file with your taxes.

The ACA provides a tax credit those enrolled that ensures their health care premium won’t be more than 8.5% of their income. The original ACA provided the tax credit for anyone whose income was between 100% and 400% of the federal poverty guideline [those who make less than 100% of the federal poverty guideline get Medicaid]. In 2025, 100% of the FPG was $15,650, so 400% was $62,600. The amount rises by $5,500 per person in a household, up to family of eight.

The enhanced credit for those earning more than 400% of FPG is what was eliminated, but it begins with this tax year, meaning their insurance premiums were higher beginning this month.

The big difference when filing this year is the new “recapture” provision. It could cost some people a lot of money, though has gotten no attention.

Many people who get ACA are self-employed or have other jobs with unpredictable incomes. A person’s ACA tax credit is based on their tax filing the previous year, which means that changes in income aren’t reflected for a year. Up until this year, the amount an enrollee actually qualified for was reconciled by adjusting the premium up or down, depending on whether their actual earned income meant they paid too much or too little. If they paid too little, amount of tax premium to be paid back was ccapped according to income, in order to continue to make the insurance affordable. The goal was to not penalize a person to the point that they can’t afford their insurance premium. 

The new recapture provision changes all that. 

Beginning with this year’s tax filing, those who got ACA insurance last year whose tax credit was higher than it should’ve been will have to pay the difference back in full directly to the IRS. Those who earned less than the estimated income, so didn’t get as much of a tax credit as they should’ve will get a refund. 

If you are getting ACA insurance this year and make less than 400% of the FPG, nothing has really changed for you, except the recapture requirement. If you earn more and are still getting ACA insurance, Congress may still extend the premium. Read our recent column for more on how the ACA works.

Tax credit wins and losses

As we noted a tax credit reduces the amount of taxes you owe, which can be a nice boost to your return. Here are some of the major tax credit wins and losses for the 2025 tax year.

Win: Child Tax Credit. The Child Tax Credit was slated to go back to $1,000 after a temporary increase during the pandemic era, but that didn’t happen. Instead, it’s been permanently increased to $2,200. The credit is for people with children 16 and under, and will be adjusted annually for inflation. It’s phased out for people who earn more than $200,000 ($400,000 if married and filing jointly). Only one parent can take the credit, so you and your ex need to work that out if it wasn’t part of the divorce decree or custody agreement.

Win: Adoption Tax Credit Refund. Anyone who adopts a child can claim a tax credit  for qualified expenses, up to $17,280 for the 2025 tax year. That’s nothing new, except the amount. But for the 2025 tax year, those who qualify can get a refund of up to $5,000 if their adoption expenses exceeded what they owed in taxes. The refund provision is only for the 2025 tax year.

Loss: EV tax credit. The tax credit of up to $7,500 for purchase of a new electric vehicle for individuals who earned $150,000 [$300,000 for joint filers, $225,000 for head of household] was eliminated as of Oct. 1. If you closed on your vehicle on that date or later, you can’t claim the credit.

There is still a $1,000 tax credit for installing EV charging equipment at a home or business, but it ends June 30 this year, so if you plan to install one, do it by then to claim the credit for next year.

Loss: Weatherization, clean energy tax credits

It’s the last year to claim a tax credit of up to $3,200 for weatherization and 30% for clean energy home updates, including qualifying insulation, new windows, heating and air conditioning, wood pellet stoves, and more. If you paid for it by Dec. 31, you can claim the tax credit. If you waited until this year, you’re out of luck.

If you’re self-employed

If you’re self-employed, it would benefit you to hire a tax professional to do your taxes. Even though you’ll pay a fee, they can save you a lot of money. A qualified tax professional, usually a certified public accountant, is familiar with the tax code and can find all sorts of deductions and ways to save money that you wouldn’t be able to. What they’ll charge usually depends on how complicated your return is and often what your income is. Look for a qualified CPA who specializes in tax preparation. 

Most online tax services will charge a fee if you’re self-employed, because you won’t be filing a simple return. If nothing else, you pay a self-employment tax, and that gives them a reason to tack on a fee. You might as well pay someone who’s working to find ways to lower your tax bill.

Whether you hire a tax professional or not, here are some things to know about filing taxes if you’re self-employed. 

Self-employment tax. If you earn $400 or more in self-employment earnings – anything from owning your own business, being fully self-employed, to driving an Uber or DoorDash on the side – you must pay a 15.3% tax on 92.4% of those net earnings. You pay it even if you are employed in a full-time job with an employer, and your self-employment earnings are a side gig. 

A large part of that – 12.4% – goes to Social Security, which you’ll get back once you start earning that benefit. Another 2.9% goes to Medicare, which you’ll also appreciate once you turn 65.

You can deduct 50% of what you paid for self-employment tax when you calculate your adjusted gross income.

While it may be tempting to take income under the table and not report it or pay taxes on it, you’ll regret it when you finally get to collect Social Security and aren’t getting as much money as you would have if you reported that income.

Installment plan. It’s a good idea to pay your taxes quarterly during the tax year. Legally, you’re required to pay taxes as you earn the money. This also keeps you from having a big bill in owed taxes when April 15 rolls around. The IRS makes it easy by providing a voucher form to send them in with, and you can also have them deducted automatically from your bank account. It’s a complicated formula to figure out how much you owe, and your income may not even be that predictable. It’s a good idea to pay more than what you owe, and that way you’ll get a return, just like the regular folks do.

Business deductions. If you are self-employed, you can also take business deductions, these are called “above the line” deductions, because they go above the one on your tax form where adjusted gross income is determined.

Home office. You can deduct your home office as a business expense only if you use the room only as a home office. It must be an actual room and can’t double as a guest room, laundry room, sewing room, or anything else. If you are employed by someone else and work at home, you can’t deduct this. You only can if you’re fully self-employed. There are two ways to do it:

  • The “simplified method” deducts $5 per square foot, up to 300 square feet, for a maximum of $1,500. 
  • The “regular method”  figures out actual expenses based on percentage of the home used and calculates utilities, rent or mortgage, and depreciation.

Hiring a tax professional to do your taxes

If you take the standard deduction, have a W-2 job, no side gigs and no complications, doing your taxes yourself should be a breeze. [And, not to belabor it, free].

If you are self-employed, or have other things going on that require a more complicated tax return, hiring a professional is a good idea. They can greatly reduce your tax bill, and generally charge $200-$1,000, depending on how complicated your taxes are and your income.

Be sure you hire a qualified professional. No matter who prepared your return, if there is a mistake or something fraudulent, the IRS considers the taxpayer responsible.

One good way to find a qualified tax professional is to ask friends and family to recommend one. Make sure they’re recommending someone who’s been doing their taxes, and not some buddy they know from the bar who they heard does taxes, or something like that. You can also check out the National Association of Tax Preparers, which has a directory.

If you hire a tax professional, look for:

  • A certified public accountant [CPA], enrolled agent or tax attorney with a valid Preparer Tax Identification Number [PTIN].
  • Check them out online to make sure they have no complaints or credible bad ratings.
  • Find out what their fee structure is, make sure they e-file and that they’ll be around after April 15 if you have questions or get audited.
  • Do not hire someone who requires you to pay the fee in advance.

Free tax preparation help

There is free tax preparation help available, particularly if you’re over 50, have a low income or have a disability.

For free tax preparation help in New Hampshire:

New Hampshire Tax Help. Made up of a coalition of the AARP Foundation Tax Aid Program, Volunteer Income Tax Assistance [VITA}, and IRS Tax Counseling for the Elderly [TCE]. The program provides free tax preparation for people of all ages and most occupations. Its website has information on where to find tax help near where you live, how to make an appointment and more.

Volunteer Income Tax Assistance [VITA]. VITA provides free tax preparation by IRS-certified volunteers for anyone with a household incomes of less than $69,000. You can find VITA locations in New Hampshire and more information, like how to make an appointment, on the Granite State United Way website. The IRS also has a site locator tool on its website.

National Disability Institute. The NDI website has information on where people with a disability can find free tax help in their area, as well as information on tax deductions and credits.

You can reach Maureen Milliken at [email protected]

Source link