Main Potential Changes for the Next Tax Season Released by the IRS in Draft Version
The next Tax Season in the United States is already beginning to take shape.
The IRS has started releasing draft versions of various forms and instructions that will be used for returns covering Tax Year 2026, which will be filed during Tax Season 2027.
Among the documents already released are the new Form 1040 (2026), Schedule 1-A, instructions for different schedules, and other forms related to federal tax returns. The IRS makes clear that these documents are still drafts and may change before the final versions are released.
This does not mean that every piece of information included in the drafts represents a new change in the law.
Some of the information reflects the implementation, within the tax forms, of rules that have already been approved, particularly changes resulting from the One, Big, Beautiful Bill Act (OBBBA).
In this article, we will look at the main changes already appearing in the 2026 documents and what taxpayers and business owners should watch for during the next Tax Season.
What Is an IRS Draft Version?
Before discussing the changes, it is important to understand what it means when an IRS form is released as a draft.
The IRS publishes preliminary versions of forms, instructions, and publications so that tax professionals, software companies, and taxpayers can begin preparing in advance.
However, the IRS explicitly states that draft forms should not be used for filing, and taxpayers should not rely on information contained in instructions or publications that are still in draft form.
Therefore, information included in a draft should be understood as an indication of how the form is being structured for the upcoming year, rather than necessarily representing the final version.
Which Tax Season Are We Talking About?
The next Tax Season will be Tax Season 2027, covering income and other information from Tax Year 2026.
This distinction is important:
Tax Year 2025 → Tax Season 2026;
Tax Year 2026 → Tax Season 2027.
The IRS has already released the 2026 version of Form 1040 and several related schedules.
The 2026 Form 1040 was released in draft form in September 2026, along with other preparatory documents.
The 2026 Form 1040 Has Already Been Released
One of the main developments is that the IRS has already made the Form 1040 for Tax Year 2026 available in draft form.
The document presents the structure that taxpayers are expected to use when reporting their 2026 income during the 2027 filing season.
Among the most relevant points is the incorporation of new deductions and information resulting from legislative changes that have already been enacted.
This means that the next tax return may contain fields and schedules that differ from those used by taxpayers during Tax Season 2026.
The New Schedule 1-A Remains Important
One of the major highlights is Schedule 1-A – Additional Deductions.
This schedule was created to bring together certain deductions introduced by recent legislation, including:
qualified tips;
qualified overtime compensation;
qualified passenger vehicle loan interest;
enhanced deduction for seniors.
Schedule 1-A serves as a centralized way to calculate these deductions before the amounts are transferred to Form 1040.
For the next Tax Season, taxpayers who qualify for these deductions should pay particular attention to the documentation required to support the amounts reported.
Deduction for Workers Who Receive Tips
One of the changes that continues to appear in the forms involves the deduction for qualified tips.
Eligible taxpayers may deduct certain amounts of qualified tips, subject to the requirements and limitations established by law.
The deduction has income limitations and specific eligibility requirements.
Workers will also need to maintain adequate documentation to support the amounts used in the calculation.
This may be particularly relevant for professionals working in industries such as:
restaurants;
hospitality;
hotels;
bars;
personal services;
other occupations that receive tips.
For self-employed workers, documentation may also include information from Schedule C, Forms 1099, and their own business records.
The IRS emphasizes the importance of keeping records of tips because certain information returns may not automatically separate all of the amounts needed to calculate the deduction.
Deduction for Qualified Overtime
Another relevant change involves the deduction for qualified overtime compensation.
For eligible taxpayers, the legislation allows a deduction of up to:
US$ 12,500 for certain taxpayers;
US$ 25,000 for married couples filing jointly.
There are income limitations and other eligibility requirements.
To properly calculate the deduction, taxpayers may need:
Form W-2;
certain Forms 1099;
pay stubs;
payroll records;
information provided by the employer.
The IRS also warns that income documents may not separately identify all amounts needed for this deduction, making it especially important to maintain detailed records.
New Attention to Vehicle Loan Interest
Another deduction worth watching is the deduction related to qualified passenger vehicle loan interest.
Eligible taxpayers may deduct up to US$ 10,000 per year of certain interest paid on qualifying vehicle loans, subject to the rules established by law.
There are requirements related to both the vehicle and the financing.
Among the requirements are certain conditions involving the vehicle and its use. To qualify for this specific deduction, the vehicle must meet certain criteria, including having its final assembly performed in the United States.
Used vehicles and leases do not qualify for this specific deduction.
For taxpayers planning to claim this deduction, it will be important to keep:
financing documentation;
the amount of interest paid;
vehicle information;
VIN;
purchase documents.
Additional Deduction for Seniors
Another important change affects taxpayers who are 65 or older.
The legislation created an additional deduction of up to US$ 6,000 per eligible person, subject to applicable rules and limitations.
Therefore, in certain situations, a married couple in which both individuals qualify could receive an additional deduction of up to US$ 12,000.
There are income limitations and other eligibility requirements.
This deduction is separate from the traditional increase in the standard deduction available to seniors.
The Standard Deduction Is Also Higher in 2026
The Standard Deduction was also updated for Tax Year 2026.
The amounts announced by the IRS are:
Filing Status | Standard Deduction – 2026 |
Single / Married Filing Separately | US$ 16,100 |
Married Filing Jointly | US$ 32,200 |
Head of Household | US$ 24,150 |
These amounts reflect annual inflation adjustments as well as changes implemented following the One, Big, Beautiful Bill Act.
For many taxpayers, this will be one of the most important figures to consider when preparing their next tax return.
Tax Brackets Were Also Updated
The federal income tax system continues to use seven tax rates:
10%;
12%;
22%;
24%;
32%;
35%;
37%.
For 2026, the income thresholds were adjusted.
For example, for a Single taxpayer:
Tax Rate | Income above |
10% | US$ 0 |
12% | US$ 12,400 |
22% | US$ 50,400 |
24% | US$ 105,700 |
32% | US$ 201,775 |
35% | US$ 256,225 |
37% | US$ 640,600 |
The thresholds are different for Married Filing Jointly.
The IRS confirmed that the seven tax rates remain in place and that the income thresholds were adjusted for 2026.
The SALT Limit Remains Relevant
Another change that will continue affecting certain taxpayers is the increased State and Local Taxes (SALT) deduction limit.
For 2026, the general limit was set at US$ 40,000, with specific phase-down rules for taxpayers whose income exceeds certain levels.
For Married Filing Separately, the limit is US$ 20,000.
This change may be particularly relevant for taxpayers who live in states with higher state and local taxes.
What Does This Mean for LLC Owners?
For business owners and LLC owners, these changes do not necessarily mean that the company's structure will change.
However, how the company's results flow through to the owner's individual tax return remains important.
Depending on the structure, a business owner may need to deal with:
Schedule C;
Schedule E;
Schedule K-1;
Form 1065;
Form 1120-S;
Form 1120;
Form 1040;
other schedules and forms.
In addition, certain personal deductions and business deductions may interact with the taxpayer's income.
For this reason, preparation for the next Tax Season should consider not only the individual return but also the business structure.
What About People Who Receive Foreign Income?
For Brazilians living in the United States, this issue is particularly important.
A U.S. person may have reporting obligations related to:
Brazilian bank accounts;
Brazilian investments;
businesses in Brazil;
real estate;
foreign financial assets;
income received from abroad.
Depending on the situation, in addition to Form 1040, taxpayers may have obligations such as:
FBAR;
Form 8938;
Form 5471;
Form 8865;
Form 8858;
Form 3520;
other international reporting forms.
Changes to the Form 1040 drafts do not eliminate these obligations.
Therefore, taxpayers with international financial connections should review their tax situation as a whole.
What Changes for Self-Employed Individuals?
Self-employed professionals and independent contractors should also pay attention.
Depending on the activity, their tax return may involve:
Schedule C;
Schedule SE;
Form 1099-NEC;
Form 1099-MISC;
Form 1099-K;
business expenses;
estimated taxes.
In addition, certain new deductions may require additional documentation.
For independent workers who receive tips or have other qualifying forms of compensation, maintaining detailed records will be particularly important.
The Next Tax Season May Require More Documentation
One of the main takeaways from the new forms is that certain deductions depend on more detailed documentation.
The IRS recommends that taxpayers maintain records that support the amounts reported on their tax returns.
This may include:
W-2s;
1099s;
pay stubs;
bank statements;
loan statements;
tip records;
investment documents;
expense receipts;
business records.
For taxpayers with multiple sources of income, organizing these documents before Tax Season can make the process significantly easier.
What Could Still Change?
Although the IRS has already released several documents, it is important to remember that some are still classified as drafts.
The IRS expressly states that these versions may change and should not be used for filing.
This means:
fields may change;
instructions may be modified;
certain requirements may receive clarification;
forms may gain new lines;
certain language may be revised.
For this reason, a draft should not be treated as though it were the final version of the form.
What Should You Do Before the Next Tax Season?
Even though the final versions of the forms may not yet be available, you can already begin preparing.
Some important steps include:
organizing your W-2s and 1099s;
reviewing your 2026 income;
keeping expense documentation;
tracking investments;
reviewing foreign bank accounts;
organizing your LLC documents;
checking estimated tax payments;
keeping documentation related to tips and overtime;
keeping vehicle financing documents, when applicable;
reviewing potential deductions and credits.
The more organized your documentation is, the easier it will be to identify potential opportunities and obligations before filing.
Main Changes to Watch
In summary, the main points appearing in the IRS documents for Tax Year 2026 include:
Change | What to Watch |
Form 1040 2026 | New structure for the next filing |
Schedule 1-A | Additional deductions |
Qualified Tips | Specific deduction for qualified tips |
Qualified Overtime | Deduction for certain overtime compensation |
Vehicle Loan Interest | Up to US$ 10,000, subject to the rules |
Senior Deduction | Up to US$ 6,000 per eligible person |
Standard Deduction | Updated for 2026 |
Tax Brackets | New income thresholds |
SALT | Updated deduction limit |
Documentation | Greater attention to required records |
These points should be reviewed together with the applicable legislation and the final instructions published by the IRS.
How Can AES Accounting Help?
Tax Season preparation begins long before Form 1040 is filed.
AES Accounting can help individuals and business owners organize their documentation, review their tax situation, identify potential deductions and credits, and prepare their tax returns according to the applicable rules.
For Brazilians living in the United States, the analysis may also involve issues related to:
income in Brazil;
foreign bank accounts;
FBAR;
Form 8938;
international investments;
LLCs;
foreign businesses;
tax planning.
Because IRS forms continue to be updated, working with official information and final versions is essential.
Conclusion
The next Tax Season is already beginning to take shape through the IRS's new documents.
For Tax Year 2026, which will be reported during Tax Season 2027, the IRS has already released draft versions of Form 1040 and several schedules, including Schedule 1-A.
Among the main points are new deductions for certain tips, overtime compensation, vehicle loan interest, and the additional senior deduction, as well as updated Standard Deduction amounts, tax brackets, and other rules for 2026.
But there is one important warning: a draft is not a final version.
The IRS may still modify forms and instructions before the next Tax Season begins.
Therefore, taxpayers and business owners should follow the final versions and start organizing their documentation now.
For those with businesses, investments, or international income, preparing in advance can be even more important.
AES Accounting. Specialists in Tax Planning, Tax Return preparation, Compliance, Bookkeeping, and international tax solutions for individuals and businesses in the United States.
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