New Tax Law Changes Could Mean Bigger Refunds for Some Californians

Recent federal tax law updates impact tips, overtime, senior deductions, and state/local tax deductions.

Published on Feb. 19, 2026

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Recent changes to federal tax law, including new provisions in the 'One Big Beautiful Bill' of 2025, could result in bigger income tax refunds for many California taxpayers this year. Key updates involve deductions for tips, overtime pay, a new senior deduction, and a higher cap on deductible state and local taxes.

Why it matters

These tax law changes aim to provide financial relief to workers, seniors, and homeowners in high-cost areas like California. However, the provisions have income limits and phase-outs, so the impact will vary depending on individual circumstances.

The details

The new tax law changes include: a $25,000 deduction for qualified tips, a $12,500 ($25,000 for couples) deduction for overtime pay, a $6,000 additional deduction for those 65+, and an increase in the cap for deductible state/local taxes from $10,000 to $40,000. These changes are temporary, set to expire at the end of 2028.

  • The new tax provisions take effect for the 2025 tax year, filed in 2026.
  • The deadline to file 2025 federal and state tax returns in California is April 15, 2026.
  • Taxpayers can request a filing extension until October 15, 2026, but any taxes owed must still be paid by the April deadline.

The players

Jill Brown

A tax preparer at Keegan's Tax & Financial Services in Vallejo, California who has been doing tax returns for 31 years.

Internal Revenue Service (IRS)

The U.S. federal agency responsible for administering and enforcing federal tax laws.

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What they’re saying

“The big four changes affect taxes on tips, taxes on overtime, a new senior deduction and a higher cap on deductible state and local taxes.”

— Jill Brown, Tax Preparer (thereporter.com)

“If you are filing separately, you don't get it.”

— Jill Brown, Tax Preparer (thereporter.com)

What’s next

Taxpayers should review the IRS guidance on the new tax law changes to determine if they qualify for any of the new deductions or credits. Those who need more time to file can request an extension, but any taxes owed must still be paid by the April 15 deadline.

The takeaway

These federal tax law updates aim to provide financial relief to workers, seniors, and homeowners in high-cost areas like California, but the impact will vary based on individual income and circumstances. Taxpayers should consult a tax professional to maximize their potential refund.