It’s that time of year again: tax season. And while filing your taxes might feel routine, several new rules could affect how much you owe or how you prepare your return.
Robert Persichitte, an affiliate professor in Metropolitan State University of Denver’s Department of Accounting, breaks down the most important changes taxpayers should understand before filing.
No federal income tax on tips and a partial break on overtime
One of the most talked-about changes is the elimination of federal income tax on tips, but Persichitte cautions that the rule applies only to certain jobs and industries. Eligibility depends on the type of work, such as food service and other traditionally tipped positions.
In most cases, employers are already tracking and reporting tips and include them properly in employees’ W-2 forms. “It should be pretty rare for tip income to need to be tracked separately, but lots of smaller employers make mistakes,” Persichitte said. In those cases, workers should review their pay stubs to make sure tips are clearly separated from regular wages.
Another commonly misunderstood change involves overtime pay. While some headlines suggest overtime is no longer taxed, Persichitte said the rule is far more limited.
Only the overtime premium portion — the “half” in time-and-a-half — is tax-free. For example, if a worker earns $20 an hour and $30 an hour for overtime, only the extra $10 qualifies for the exemption.
Unlike tips, employers are not required to track overtime premium amounts separately for tax purposes. Because this distinction is not clearly reported on W-2 forms, employees should review their pay stubs carefully and adjust their tax filings manually using tax software or a professional preparer.
Higher cap on state and local tax deductions
The cap on state and local tax deductions has increased significantly this year. The limit rose from $10,000 to $40,000 for single filers and married couples filing jointly, and to $20,000 for married couples filing separately.
This change primarily affects homeowners, especially those who recently purchased a home. Renters or taxpayers without property taxes are unlikely to see much impact.
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Changes to 1099-K reporting
Taxpayers who earn income through platforms such as Uber, Venmo, Airbnb or eBay might not receive a 1099-K form this year. Persichitte emphasized that this does not mean the income is tax-free.
“All income earned through apps or online platforms remains taxable,” he said. “Without a 1099-K, taxpayers are responsible for tracking income themselves using profit-and-loss records.”
Child tax credit updates
Parents and caregivers will see changes to the child tax credit, which increased to $2,200 per child, with up to $1,700 refundable.
However, eligibility rules have tightened. Most individuals listed on the return must now have a Social Security number, meaning families using Individual Taxpayer Identification Numbers (ITINs) might no longer qualify in many cases.
Persichitte also noted that families paying for child care can now contribute more pre-tax dollars through dependent care flexible spending accounts. These changes occur during employer benefits enrollment, making it especially important for those starting new jobs to review benefit options carefully.
Free tax assistance for qualified people
Accounting students at MSU Denver offer free tax preparation services to households earning less than $69,000 as part of the Volunteer Income Tax Assistance program for 2026. MSU Denver has been a proud supporter of the IRS-sponsored VITA program for more than 30 years, providing tax assistance to low-income people and families throughout the Denver area.
All VITA student tax preparers are certified by the IRS and work under the guidance of experienced faculty members.
Vehicle loan interest deductions
Interest on loans for new vehicles may be deductible, but only if strict requirements are met. These include vehicles with final assembly in North America and a weight rating under 14,000 pounds.
Persichitte strongly advises taxpayers not to rely solely on dealership guidance. “Talk to a tax professional before assuming you qualify,” he said.
Energy efficiency credits eliminated
One of the biggest changes this year is the elimination of federal tax credits for electric vehicles, solar panels and other energy-efficient upgrades.
Colorado still offers some state-level incentives, but they are significantly smaller than the former federal credits.
Common misconceptions to avoid
One of the biggest misunderstandings is the belief that most taxpayers will see dramatic tax cuts. While the “One Big Beautiful Bill Act” was widely promoted as lowering taxes, much of the law simply extended provisions from the “Tax Cuts and Jobs Act.”
Without the extension, rates would have increased, meaning most taxpayers will continue paying roughly the same rates as last year.
Another persistent myth is that Social Security income is now tax-free. While some credits may offset taxes for certain recipients, Social Security benefits remain taxable under the same general rules.
Similarly, many homeowners believe they can avoid taxes on the sale of a primary residence if they buy another home. That is incorrect. The real benefit comes from the capital gains exclusion — up to $500,000 for married couples and $250,000 for individuals — regardless of whether another home is purchased.
Plan before you file
Persichitte stresses that tax planning should happen before major financial decisions, not during filing season.
“Selling assets, withdrawing retirement funds or purchasing property can all have tax consequences,” he said. “The best time to plan is before you make the move.”
