Why 2026 IRS News and New Updates Will Change the Way You Approach Tax Planning This Month

NEW HAVEN, CT – JOSE’S TAX SERVICE – FEBRUARY 28, 2026

As of today, February 28, 2026, the tax season is officially in high gear. For residents of New Haven and small business owners across Connecticut, this month represents a critical pivot point. The Internal Revenue Service (IRS) has implemented several structural changes for the 2026 filing year that fundamentally alter how you should categorize expenses, project your liabilities, and ultimately, how you maximize tax refund opportunities.

At Jose's Tax Service, we are seeing a shift in the traditional "wait and see" approach. With the current tax update landscape, waiting until April could result in missed deductions that are significantly higher than in previous years. This guide breaks down the essential 2026 IRS news and provides actionable steps to ensure your tax planning is optimized before the March deadlines approach.

The Massive Shift in SALT Deductions!

One of the most significant changes for 2026 involves the State and Local Tax (SALT) deduction cap. For the past several years, taxpayers were limited to a $10,000 deduction for state and local taxes paid. This was particularly burdensome for New Haven residents who often face higher property and state income taxes.

For the 2026 tax year, the SALT deduction cap has been substantially expanded to $40,400. However, this comes with specific phase-outs beginning at $505,000 in modified adjusted gross income (MAGI) for single filers.

What you must do now:

1. Review your property tax payments: Ensure you have the exact records for all 2025 payments made to the City of New Haven.
2. Evaluate itemization: Because the cap has quadrupled, many taxpayers who previously took the standard deduction should now consider itemizing on Schedule A (Form 1040).
3. Compare your total state income tax withheld: Add your CT state withholding to your local property taxes to see if you exceed the standard deduction threshold.

2026 Standard Deduction Increases and Senior Benefits!

The IRS has adjusted the standard deduction to account for recent economic shifts. For 2026, the standard deduction has increased to:

• Married Filing Jointly: $32,200
• Single Filers: $16,100

While these higher numbers help many families lower their taxable income automatically, there is a specific update for seniors that requires immediate attention. Taxpayers aged 65 or older can now claim an additional $6,000 deduction per person. If you are married and both spouses are over 65, that is a $12,000 additional deduction. This benefit is available whether you take the standard deduction or itemize, though it phases out once income exceeds $75,000 for individuals or $150,000 for joint filers.

Instructional Step: If you qualify for the senior deduction, ensure you check the appropriate box on Form 1040. Failure to do so can result in overpaying your tax liability by thousands of dollars.

Alternative Minimum Tax (AMT) Warning for High Earners!

While many updates provide relief, the Alternative Minimum Tax (AMT) exemption phase-outs have reverted to lower levels. This means more high-income taxpayers in the New Haven area may be subject to the AMT than in the last two years.

• Single Filers Phase-out: Reverts to $500,000.
• Married Filing Jointly Phase-out: Reverts to $1,000,000.

If your income falls near these thresholds, your tax planning strategy must involve a secondary calculation to determine if the AMT applies to you. Use Form 6251 to determine your alternative minimum tax liability. Avoiding this step can lead to unexpected balance-due notices and potential penalties for underpayment.

Small Business Updates: Section 199A Adjustments!

For our local New Haven entrepreneurs and small business owners, the Qualified Business Income (QBI) deduction, often referred to as the Section 199A deduction, has seen a slight easing of phase-out ranges.

In 2025, the phase-out range was between $50,000 and $100,000. For the 2026 tax season, these ranges have expanded to $75,000 to $150,000. This expansion allows more business owners to claim the full 20% deduction on their qualified business income before the limitation begins to reduce the benefit.

Small Business Checklist:

• Verify QBI eligibility: Ensure your business is a "pass-through" entity (Sole proprietorship, LLC, S-Corp, or Partnership).
• Calculate W-2 wages paid: Your deduction may be limited by the amount of wages you pay to employees.
• Document capital investments: Large equipment purchases made in 2025 can impact your QBI calculation.

For more detailed information on business filings, you can visit our tax update section.

Maximizing Your Refund in New Haven!

To maximize tax refund results this year, accuracy is more important than speed. The IRS has integrated new AI-driven auditing tools in 2026 that flag discrepancies between 1099 forms and reported income almost instantly.

Steps to Ensure a Fast Refund:

1. Use Direct Deposit: This remains the fastest way to receive funds. Paper checks can take up to 6-8 weeks longer.
2. Verify Bank Routing Numbers: Double-check your account and routing numbers on your filing software or with your preparer.
3. Monitor Refund Status: Once you file, use the "Where's My Refund?" tool on the IRS website or through the IRS2Go app.
4. E-File Only: Avoid paper filing at all costs. The IRS processing centers are prioritizing digital transmissions to clear the 2026 backlog.

If you are looking for professional tax preparation New Haven services, Jose's Tax Service is here to ensure every line of your return is scrutinized for maximum savings. You can view our full site for more resources.

ABLE Account and Retirement Contribution Limits!

Tax planning for 2026 should also involve a look at your tax-advantaged accounts. The ABLE (Achieving a Better Life Experience) account contribution limit has risen to $7,500 for 2026. This allows families of individuals with disabilities to shelter more income from taxes while saving for future expenses.

Additionally, retirement contribution limits have been adjusted. If you have not yet maximized your 2025 contributions, you generally have until April 15, 2026, to contribute to a Traditional or Roth IRA.

Pro-Tip: Contributing to a Traditional IRA can lower your Adjusted Gross Income (AGI), which may help you qualify for other credits that have strict income phase-outs, such as the Child Tax Credit or the Earned Income Tax Credit (EITC).

Critical Deadlines and Final Reminders!

As we conclude February, the following deadlines are non-negotiable for a successful 2026 tax season:

• March 15, 2026: Deadline for S-Corp (Form 1120-S) and Partnership (Form 1065) filings.
• April 15, 2026: Deadline for individual income tax returns (Form 1040) and C-Corporation returns (Form 1120).
• April 15, 2026: Last day to make 2025 IRA contributions.

Warning Language: Failure to file by these deadlines can lead to a failure-to-file penalty, which is generally 5% of the unpaid taxes for each month or part of a month that a tax return is late.

Instructional Command:
Collect all 1099-NEC, 1099-MISC, and W-2 forms immediately. If you are missing a document, contact the issuer today. Do not file based on "estimated" numbers from pay stubs, as this frequently causes a mismatch in IRS records and can delay your refund by months.

Why Local Expertise Matters in 2026

Tax laws are federal, but their impact is local. Here in New Haven, understanding how the new SALT limits interact with Connecticut’s specific tax code is vital. At Jose's Tax Service, we don't just "plug in numbers." We look at your entire financial picture to ensure you are utilizing every new 2026 update to your advantage.

Whether you are a freelancer navigating the new QBI ranges or a homeowner looking to leverage the $40,400 SALT cap, we provide the professional guidance you need with the casual, friendly service you deserve.

For a complete list of our services and to stay updated on the latest news, check our sitemap or visit our office.

Final Reminder: Tomorrow is March 1st. The window for proactive tax planning is closing. Contact us today to secure your appointment and ensure your 2026 filing is handled with precision.

Disclaimer: This blog post provides general information and should not be substituted for professional legal or tax advice. Please consult with a qualified tax professional regarding your specific financial situation.