Introduction
"2026 tax changes" can mean two things, and that split confuses many filers. Most readers want the 2026 filing season, which opened January 26, 2026, and covers income earned in tax year 2025.
Tax year 2026 returns are filed in 2027. This article covers the 2025 returns you file now, with notes on 2026 adjustments.
Form 1040 is the U.S. individual income tax return. Australian residents who are U.S. citizens, green-card holders, or earn U.S.-source income still need to file it.
The 2025 return adds new deductions on a new Schedule 1-A, revised credits, and cross-border reporting alongside the form. Amounts below are in USD.
Key Takeaways
- Returns filed in 2026 report 2025 income; 2026 income is reported in 2027.
- Most new deductions flow through Schedule 1-A, not the face of Form 1040.
- Temporary deductions run 2025-2028, so check phaseouts and sunsets.
- Australian-resident U.S. filers must coordinate Form 1040 with ATO reporting.
What the 2026 Filing Season Means for Form 1040
The IRS applies the One, Big, Beautiful Bill Act (Pub. L. 119-21, enacted July 4, 2025). Returns for 2025 are generally due April 15, 2026.
Permanent versus temporary provisions
- No scheduled expiry: reduced individual rates, the higher standard deduction, and the $2,200 Child Tax Credit. "Permanent" means no sunset, not frozen dollar amounts.
- 2025-2028 only: deductions for tips, overtime, vehicle-loan interest, and the additional senior deduction.
- 2025-2029: the higher SALT cap, which returns to $10,000 in 2030.
Use the final 2025 Form 1040, schedules, and instructions. Prior-year layouts and news summaries will mislead you. The new Schedule 1-A line 38 flows to Form 1040 line 13b.
New Deductions and Income-Related Changes
Standard deduction and brackets
| Status | 2025 standard deduction |
|---|---|
| Single | $15,750 |
| Married filing jointly | $31,500 |
| Married filing separately | $15,750 |
| Head of household | $23,625 |
The 2025 top rate of 37% applies above $626,350 for single filers and $751,600 for joint filers.
Deductions you can claim without itemising
Schedule 1-A deductions are available whether you take the standard deduction or itemise.
| Deduction | Maximum | MAGI phaseout starts |
|---|---|---|
| Qualified tips | $25,000 per return | $150,000 ($300,000 joint) |
| Qualified overtime | $12,500 ($25,000 joint) | $150,000 ($300,000 joint) |
| Vehicle-loan interest | $10,000 per return | $100,000 ($200,000 joint) |
| Additional senior deduction | $6,000 per person | $75,000 ($150,000 joint) |
Key rules to check:
- Tips and overtime: a valid SSN is required, and married couples must file jointly. Tips must come from a listed occupation. Only the half-time premium above regular pay required by the FLSA qualifies as overtime.
- Vehicle loans: new, personal-use vehicles with U.S. final assembly, a loan taken after December 31, 2024, a first lien, and a VIN. Used vehicles and leases do not qualify.
- Seniors: age 65 by year-end, a valid SSN, and joint filing for married couples.
Itemised deductions and the SALT cap
The 2025 SALT cap is $40,000 ($20,000 if married filing separately). It phases down by 30% of MAGI above $500,000, but not below $10,000. Taxpayers with heavy state and local taxes should compare Schedule A with the standard deduction.
Deductions versus credits
- Above-the-line adjustments reduce gross income to AGI.
- Itemised deductions replace the standard deduction when larger.
- Credits subtract directly from tax owed.
Credits and Other Form 1040 Benefits
Child Tax Credit
The CTC is up to $2,200 per child under 17, with a refundable ACTC up to $1,700. Phaseout begins at MAGI of $400,000 joint or $200,000 otherwise. File Schedule 8812. The child needs an employment-valid SSN, and filing Form 2555 disqualifies the ACTC.
Earned Income Tax Credit
The EITC is refundable. Maximums for 2025 range from $649 with no children to $8,046 with three or more. The investment income limit is $11,950. Childless claimants must be 25-64 and live in the U.S. for over half the year. Form 2555 prevents the EITC.
Education, care, and adoption credits
| Credit | 2025 figures | Form |
|---|---|---|
| American Opportunity | Up to $2,500 per student; 40% (up to $1,000) may be refundable | 8863 |
| Lifetime Learning | Up to $2,000 per return; nonrefundable | 8863 |
| Child and dependent care | 20%-35% of up to $3,000 (one person) or $6,000 (two or more); nonrefundable | 2441 |
| Adoption | Up to $17,280 per child; up to $5,000 refundable | 8839 |
Energy credits ended
- 25C and 25D: No credit after December 31, 2025.
- 25E and 30D clean vehicles: No credit for vehicles acquired after September 30, 2025.
- 30C refueling equipment: No credit after June 30, 2026.
These are federal rules. State incentives are separate.
Eligibility is not a refund
Credits can be limited by tax liability, earned income, MAGI, filing status, or paperwork. The IRS Form 8839 instructions give a useful example.
On $20,000 of adoption expenses, the maximum credit is $17,280. The filer claims $5,000 refundable and $10,000 nonrefundable, then carries $2,280 forward. The remaining $2,720 of expenses cannot be claimed.
Australian Taxpayers and Cross-Border Form 1040 Issues
When an Australian resident files
Australian residence alone does not decide Form 1040 filing. Triggers include:
- U.S. citizenship
- Green-card status at any time in the year
- Substantial presence (31 current-year days and 183 weighted days over three years)
- Net self-employment earnings of $400 or more
Nonresidents with only U.S.-source income generally use Form 1040-NR instead.
International items beside Form 1040
- Form 1116: foreign tax credit, limited by U.S. tax on foreign-source income. Taxes on income excluded under the FEIE cannot also generate a credit.
- Form 2555: foreign earned income exclusion, up to $130,000 per person, which needs a foreign tax home plus the bona fide residence or 330-day presence test.
- FBAR (FinCEN 114): filed separately and electronically when foreign accounts exceed $10,000 at any time. IRS FBAR guidance confirms the April 15 deadline (automatic extension to October 15).
- Form 8938: attached to the return. Abroad thresholds are $200,000 at year-end for single filers and $400,000 for joint filers.
Treaty and residency caution
The U.S.-Australia treaty's saving clause generally preserves U.S. taxation of citizens. Residency tie-breakers look to permanent home, habitual abode, then closer personal and economic ties.
The ATO confirms U.S. citizens abroad generally keep U.S. tax obligations. Treaty analysis and the Australian foreign income tax offset are fact-specific, so get professional review.
Records checklist
- U.S. and Australian income statements
- Investment and brokerage records
- Foreign tax paid, with proof of payment
- Exchange-rate method (generally the rate when received, paid, or accrued)
- Prior U.S. returns
- Foreign account balances and details
- Evidence for claimed deductions and credits
How to Prepare and File Form 1040 in 2026
Determine whether a return is required
- Confirm your status: citizen, green-card holder, resident alien, or nonresident.
- Compare gross income with the filing threshold (for example, $15,750 for single filers under 65).
- Check self-employment income and U.S.-source income.
- Note any overdue prior years, and whether an extension or amendment applies.
Gather forms and records
- W-2s, 1099s, and brokerage statements
- Mortgage and charitable records if itemising
- Vehicle-loan interest statements with the VIN
- Tip and overtime records
- Education and care expense records
- Foreign income and tax documents
Map changes to forms
| Item | Where it goes |
|---|---|
| Tips, overtime, vehicle interest, senior deduction | Schedule 1-A, then line 13b |
| SALT and itemised deductions | Schedule A |
| CTC/ACTC | Schedule 8812 |
| Foreign tax credit | Form 1116 |
| Foreign earned income exclusion | Form 2555 |
| Foreign assets | Form 8938 |
| Interest and dividends | Schedule B |
Verify every line reference against the final IRS forms.
Review, submit, and track
Before filing, check SSNs and ITINs, bank details, filing status, dependents, income matching, and signatures. Then note the key dates:
- Deadline: April 15, 2026. Form 4868 extends filing to October 15, not payment.
- Taxpayers abroad: automatic extension to June 15, 2026, though interest runs from April 15.
- Amendments: Form 1040-X, generally within three years of filing.
- Penalties: late filing is 5% per month up to 25%; late payment is 0.5% per month.
- Security: use an IP PIN if assigned.
- Tracking: IRS Online Account and Where's My Refund; most e-filed refunds issue within 21 days.
Australian businesses and individuals with U.S. filing obligations may want cross-border support. VJM Global offers Form 1040 and 1040-NR preparation through U.S.-compliant professionals and has served 250+ Australian businesses. Outcomes depend on your facts, and no eligibility or savings can be guaranteed.
Frequently Asked Questions
What tax year do I file on Form 1040 in 2026?
Most people file a 2025 return in 2026, reporting income earned in 2025. Tax year 2026 income is reported on a return filed in 2027.
What is new on Form 1040 for the 2026 tax filing season?
Schedule 1-A adds deductions for tips, overtime, vehicle-loan interest, and seniors. The CTC is $2,200, and several energy credits are ending. Check the current IRS instructions.
Do Australian residents have to file a U.S. Form 1040?
It depends on citizenship, green-card status, presence, income, and filing thresholds. Australian residence alone does not decide it.
What new deductions can I claim on Form 1040 in 2026?
Qualified tips, overtime, passenger-vehicle loan interest, and an additional senior deduction, alongside the standard or itemised deduction. Each has caps and income limits.
Are the new tax deductions and credits available to everyone?
No. Income limits, filing status, age, SSNs, tax liability, and documentation can all restrict eligibility.
What documents do I need to file Form 1040 from Australia?
U.S. income forms, Australian income records, foreign tax paid, exchange-rate support, investment statements, prior returns, and proof for deductions and credits.
