Tax Filing Season Coming Soon
Published January 9, 2026
The Internal Revenue Service (IRS) announced that the 2026 filing season will open on January 26, 2026, and encouraged individuals to take steps now to prepare for filing their 2025 federal income tax returns. The IRS emphasized that early preparation could help reduce errors, avoid delays and make the filing process less stressful. Taxpayers are encouraged to visit the IRS’s “Get Ready” page on IRS.gov, which offers updated checklists, tools and no-cost filing options.
The deadline is Wednesday, April 15, 2026, to file and pay any tax due. If a taxpayer needs additional time to file, an extension to file request must be made by the April deadline. One of the most important steps taxpayers can take is to access an IRS Individual Online Account. The account allows taxpayers to view account balances, review tax records, make and manage payments and manage communication preferences. Online accounts also allow taxpayers to securely protect their tax information and streamline interactions with the IRS. The online accounts permit taxpayers to view their refund status as well.
- Direct Deposit – In addition, the IRS continues to encourage taxpayers to use direct deposit for refunds. Pursuant to a presidential executive order modernizing federal payments, the IRS is phasing out paper refund checks. Taxpayers without a bank account are encouraged to open one to avoid refund delays and ensure timely receipt of funds.
- Tax Law Changes – Taxpayers should also review new tax law changes for 2025 before filing. Recent legislation introduced new deductions and credits that may reduce tax liability or increase refunds. Beginning in 2025, eligibility for certain credits for other dependents requires that the taxpayer and their spouse, if filing jointly, possess valid Social Security numbers or Individual Taxpayer Identification Numbers issued on or before the return’s due date, including extensions.
- Disclose All Income – Income earned through payment apps and online marketplaces remains fully taxable. Payment card companies must issue Form 1099-K for any payment amount, and payment apps and online marketplaces must issue Form 1099-K when payments exceed $20,000 and involve more than 200 transactions during the year. The IRS reminds taxpayers that all income from part-time work, gig activities or online sales must be reported even if no form is received.
- Digital Assets – Taxpayers engaged in transactions involving digital assets, including cryptocurrency, stablecoins and non-fungible tokens (NFTs), must report those transactions. Some taxpayers may receive Form 1099-DA from brokers, but all taxpayers are required to answer the digital asset question on Form 1040 and report any related income, gains or losses regardless of whether a form is issued.
The IRS encouraged taxpayers to begin preparing now by reviewing tax law changes, gathering necessary documents and using available online tools to ensure a smooth filing experience. Early preparation can help taxpayers file accurately, avoid common mistakes and reduce delays during the 2026 filing season. Military members, veterans and other qualified individuals may obtain free tax return preparation assistance through MilTax. The Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs also offer assistance at no cost to taxpayers.
IRS Guidance for New Car Loan Interest Deduction
On December 31, 2025, the Department of the Treasury and the Internal Revenue Service (IRS) released proposed regulations to provide guidance on the new deduction for car loan interest enacted as part of the One Big Beautiful Bill Act (OBBBA). The guidance is intended to assist individual taxpayers and lenders in applying the “No Tax on Car Loan Interest” provision beginning with the 2025 tax year.
The new provision allows eligible taxpayers to deduct up to $10,000 per year of interest paid on certain vehicle loans during tax years 2025 through 2028. The deduction applies to interest paid on loans incurred after December 31, 2024, to purchase new passenger vehicles assembled in the United States for personal use. Notably, the deduction is available both to taxpayers who itemize deductions and those who claim the standard deduction.
To qualify for the deduction, the vehicle must be a new car, minivan, van, sport utility vehicle (SUV), pickup truck or motorcycle with a gross vehicle weight rating of less than 14,000 pounds. Used vehicles and leased vehicles do not qualify. The proposed regulations clarify that final assembly must occur in the United States and taxpayers may rely on the vehicle identification number (VIN), the final assembly information on the vehicle’s window sticker or the National Highway Traffic Safety Administration’s VIN decoder website to establish eligibility.
The deduction is subject to income-based phaseouts. For single filers, the deduction begins to phase out when modified adjusted gross income exceeds $100,000 and is fully phased out at higher income levels. For married taxpayers filing jointly, the phaseout begins at $200,000 of modified adjusted gross income. The guidance confirms that the $10,000 annual limitation applies on a per return basis and that interest in excess of the cap is not deductible.
The guidance also addresses how taxpayers determine whether a vehicle is purchased for personal use. A vehicle is treated as acquired for personal use if at the time the loan is issued, the taxpayer reasonably expects to use the vehicle more than 50% for personal, non-business purposes. If a vehicle is used primarily for business, interest on the loan does not qualify for the deduction.
In addition to taxpayer eligibility rules, the Treasury and IRS provided detailed guidance for lenders and other recipients of vehicle loan interest. Certain lenders and other interest recipients are required to file information returns with the IRS reporting vehicle loan interest received during the tax year. These reporting requirements are intended to allow taxpayers to substantiate their deductions and include vehicle-specific and loan-specific information. The IRS previously issued transition guidance applicable to certain loans in 2025. The proposed regulations expand upon that transition relief by clarifying who must report, when reporting is required and what information must be included on forms furnished to both the IRS and taxpayers.
The Treasury and IRS invited public comments on the proposed regulations, with comments due by February 2, 2026. Additional guidance, including finalized regulations and updated tax forms and instructions, will be developed to support implementation of the new deduction.
Exempt Status Revocation Sustained
In Milk Saving Starving Children Foundation v. Commissioner; No. 13274-22X; T.C. Memo. 2026-1, the Tax Court upheld the Internal Revenue Service’s (IRS) revocation of the Foundation’s tax-exempt status under Section 501(c)(3). The Court granted the IRS’s Motion for Summary Judgment, concluding that the Foundation failed to operate exclusively for exempt purposes and therefore did not satisfy the operational test required for continued exemption.
Milk Saving Starving Children Foundation (Foundation) was incorporated in Pennsylvania in 2001 and applied for recognition of exemption based on representations that it would raise funds to purchase rice, soy and/or powdered milk for distribution to starving children worldwide. The IRS granted exempt status based on those representations.
In 2002, the Foundation acquired real property and, in 2003, began operating a cash-only coffee shop known as Café Beignet. In addition, portions of the property were leased to commercial tenants, including a restaurant and pizza shops. These business activities were not disclosed in the Foundation’s exemption application.
While the Foundation made minimal charitable distributions early in its existence, charitable activity ceased entirely by 2011. In 2020, during the examination of the Foundation’s 2018 tax year, the IRS determined that none of the Foundation’s expenditures were attributable to charitable food purchases or distributions. Instead, the Foundation’s expenses primarily consisted of mortgage payments, insurance and other costs associated with maintaining the real property. After the IRS initiated its examination, the Foundation made some limited charitable distributions in 2020.
Based on these facts, the IRS issued a Final Adverse Determination Letter revoking the Foundation’s exempt status effective July 1, 2017. The Foundation filed a petition for declaratory judgment seeking reinstatement. The IRS moved for Summary Judgment. The Foundation submitted a letter that the Court treated as a Motion for Extension of Time to respond to the IRS’s motion. The Court granted the extension until August 5, 2024. The Foundation failed to file a substantive response despite being given multiple opportunities.
In analyzing the facts, the Tax Court applied the operational test under Section 501(c)(3), which requires that an organization operate primarily in furtherance of exempt purposes and that any non-exempt activities be insubstantial. The Court emphasized that an organization’s actual operations, rather than its stated purposes, control the exemption analysis. The Court concluded that the Foundation’s primary activities consisted of operating a commercial business and leasing property to for-profit tenants, while charitable activities were sporadic, minimal and resumed only after IRS scrutiny.
The Court further noted that the Foundation failed to rebut the Commissioner’s factual assertions or demonstrate the existence of a genuine dispute of material fact. As a result, Summary Judgment was appropriate.
Accordingly, the Tax Court sustained the Commissioner’s determination and held that the Foundation’s exemption under Section 501(c)(3) was properly revoked. The case serves as a reminder that substantial commercial activity and extended failure to carry out exempt functions can justify the revocation of exempt status.
Applicable Federal Rate of 4.6% for January: Rev. Rul. 2026-2; 2026-3 IRB 1 (15 December 2025)
The IRS has announced the Applicable Federal Rate (AFR) for January of 2026. The AFR under Sec. 7520 for the month of January is 4.6%. The rates for December of 4.6% or November of 4.6% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2026, pooled income funds in existence less than three tax years must use a 4.0% deemed rate of return. Charitable gift receipts should state, “No goods or services were provided in exchange for this gift and the nonprofit has exclusive legal control over the gift property.”
