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IRS Raises Clean Electricity Production Tax Credit to 3.1 Cents Per Kilowatt-Hour for 2026

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2026 Clean Electricity Production Credit
The IRS has set the 2026 Clean Electricity Production Credit at 0.6 cents per kilowatt-hour for the base rate and 3.1 cents per kilowatt-hour for qualifying facilities eligible for the higher rate. Sunday Stock/Shutterstock

Clean electricity producers may qualify for a federal tax credit of up to 3.1 cents per kilowatt-hour in 2026 after the IRS published its annual inflation adjustment for the Clean Electricity Production Credit. The IRS announced the updated amounts in a Federal Register notice published September 4. The credit, established under Section 45Y of the Internal Revenue Code, provides a tax incentive based on the amount of qualifying clean electricity a taxpayer produces.

For 2026, the inflation-adjusted base credit is 0.6 cents per kilowatt-hour, while qualifying facilities eligible for the higher alternative amount can receive 3.1 cents per kilowatt-hour.

The Higher Credit Increased From 3 Cents to 3.1 Cents

Section 45Y starts with statutory amounts of 0.3 cents per kilowatt-hour for the base credit and 1.5 cents for the higher alternative credit. Those figures are adjusted for inflation each year.

For 2026, the IRS calculated an inflation adjustment factor of 2.0570, using the 2025 GDP implicit price deflator of 128.986 and the 1992 figure of 62.707.

After applying the adjustment and the rounding rules required under Section 45Y, the 2026 base amount remains 0.6 cents per kilowatt-hour, while the higher amount rises to 3.1 cents. In comparison, the inflation-adjusted rates for 2025 were 0.6 cents and 3 cents per kilowatt-hour, respectively.

Who Can Qualify for the 3.1-Cent Rate?

Not every qualifying clean electricity facility receives the higher rate. The alternative amount generally applies when a qualified facility has a maximum net output of less than one megawatt, began construction before January 29, 2023, or meets applicable prevailing-wage and apprenticeship requirements.

Facilities that don’t satisfy the requirements for the alternative amount generally receive the lower base rate. The Clean Electricity Production Credit is technology-neutral and focuses on greenhouse gas emissions rather than limiting eligibility to a short list of specific renewable technologies.

A qualified facility generally must generate electricity, have been placed in service after 2024 and have a greenhouse gas emissions rate that isn’t greater than zero. Special rules can also apply to new units or additions of capacity at older facilities.

What Could the Credit Be Worth?

Because Section 45Y is based on electricity production, the financial value of the credit can become significant as output increases. For a simple illustration, 1 million qualifying kilowatt-hours multiplied by the 3.1-cent 2026 rate equals $31,000 before considering other requirements, limitations or potential increases.

At the 0.6-cent base rate, the same 1 million kilowatt-hours would produce a $6,000 credit before other applicable rules.

Those examples don’t mean every facility generating that amount of electricity will receive those exact tax benefits. Eligibility, qualifying production, facility characteristics and compliance with the tax code all matter. Still, they demonstrate why what looks like a tiny fraction of a dollar per kilowatt-hour can translate into substantial tax value for larger clean-energy projects.

Some Facilities Can Qualify for Additional Increases

The inflation-adjusted rate isn’t necessarily the end of the calculation. Section 45Y provides a 10% increase for qualifying facilities located in designated energy communities. The IRS also provides for a domestic-content bonus when a facility satisfies requirements involving domestically produced steel, iron and manufactured products.

Those incentives can affect the economics of developing and operating qualifying clean-energy facilities, making location, construction practices and sourcing financially important considerations. Businesses considering the credit should determine which provisions apply to a specific facility rather than assuming the published 3.1-cent figure represents the final credit available for every project.

The Credit Is Claimed on Form 7211

Taxpayers claiming the Section 45Y Clean Electricity Production Credit generally use Form 7211, Clean Electricity Production Credit. The IRS says taxpayers must complete a separate Form 7211 for each qualified facility when required to claim the credit. The credit can also be eligible for provisions allowing certain taxpayers to transfer credits to unrelated parties for cash. Certain tax-exempt and governmental entities may instead qualify for elective payment provisions.

Pre-filing registration is required for taxpayers using applicable transfer or elective-payment provisions. Businesses should also be aware that a Section 45Y credit generally can’t be claimed for the same facility when certain other federal energy credits have already been claimed for that facility.

Why the 2026 Adjustment Matters

The September IRS notice doesn’t create a new clean-energy tax credit. Instead, it establishes the inflation-adjusted amounts used to calculate an existing credit for electricity produced, sold, consumed or stored during calendar year 2026. For facilities qualifying for the higher rate, the adjustment raises the applicable amount from 3 cents per kilowatt-hour in 2025 to 3.1 cents in 2026.

That one-tenth-of-a-cent difference may sound insignificant to an individual household, but at commercial electricity-production levels it can add up quickly. A facility with 100 million qualifying kilowatt-hours, for example, would see a $100,000 difference between a 3-cent and 3.1-cent rate before considering all other eligibility rules and adjustments.

Clean-energy producers, developers and their tax advisers should therefore use the new 2026 rates when estimating the value of qualifying Section 45Y production and confirm that the facility satisfies the requirements for the particular credit rate and any additional increases being claimed.

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IRS Finalizes New Car Loan Interest Deduction — Who Can Claim Up to $10,000

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car loan interest deduction
The IRS has finalized regulations for a temporary federal deduction allowing eligible taxpayers to deduct up to $10,000 a year in interest on loans used to buy qualifying new vehicles assembled in the United States. Zamrznuti tonovi/Shutterstock

Americans financing certain new vehicles can deduct up to $10,000 a year in car loan interest under a temporary federal tax break, and the IRS has now finalized regulations explaining who qualifies. The deduction was created by the One Big Beautiful Bill Act signed into law July 4, 2025, and applies to qualifying vehicle loans incurred after December 31, 2024. It is available for tax years 2025 through 2028 under current law.

One particularly important feature is that taxpayers don’t have to itemize deductions to claim it. Someone who takes the standard deduction may still qualify for the car loan interest deduction. But the $10,000 headline comes with several significant restrictions.

The Vehicle Generally Must Be New and Assembled in the United States

The deduction doesn’t apply to every car loan. To qualify, the loan must be used to purchase an eligible passenger vehicle for personal use, and the debt must be secured by a first lien on the vehicle. The original use of the vehicle must also begin with the taxpayer, which generally means the vehicle must be treated as new when purchased.

Another major requirement is final assembly in the United States. The IRS rules allow taxpayers to determine the final assembly location using information encoded in the vehicle identification number or the final assembly point shown on the vehicle’s required label.

Eligible vehicle classifications can include cars, minivans, vans, SUVs, pickup trucks and motorcycles that satisfy the applicable requirements. Vehicles must also have a gross vehicle weight rating below 14,000 pounds. Leases don’t qualify, nor do loans financing certain fleet sales, non-personal commercial vehicles, salvage-title vehicles, or vehicles intended for scrap or parts.

The Deduction Is Worth Up to $10,000 a Year

Eligible taxpayers can deduct qualified interest paid or accrued during the year, subject to a maximum of $10,000 per tax return per year. That doesn’t mean buying a qualifying vehicle automatically produces a $10,000 deduction. A taxpayer who pays $2,800 of qualifying interest during the year, for example, generally has only $2,800 potentially available for the deduction before considering other limitations. The tax savings also aren’t the same as the deduction itself.

A $3,000 deduction doesn’t mean the IRS sends someone an extra $3,000. Instead, a deduction generally reduces the amount of income subject to federal income tax. The tax break is temporary under current law and applies to qualifying interest for tax years 2025 through 2028.

Higher-Income Taxpayers May Get a Smaller Deduction

Income can reduce or completely eliminate the tax break. The deduction begins phasing out when modified adjusted gross income exceeds $100,000 for most filers or $200,000 for married couples filing jointly.

For each $1,000—or portion of $1,000—above the applicable threshold, the otherwise allowable deduction is reduced by $200. That means shoppers shouldn’t assume they’ll receive the full tax benefit simply because the vehicle and loan meet the other requirements.

Taxpayers should also remember that eligibility for a deduction is only one factor to consider when financing a vehicle. Paying thousands of dollars of additional interest solely to receive a tax deduction generally doesn’t make that interest free.

Your VIN Will Matter at Tax Time

Taxpayers claiming qualified passenger vehicle loan interest must include the vehicle’s VIN on their federal income tax return. The VIN is important both for identifying the vehicle and for helping establish whether its final assembly occurred in the United States. The IRS regulations point taxpayers toward vehicle-manufacturing information that can be used to determine final assembly location.

Consumers shopping for a new vehicle who expect to use the deduction may therefore want to verify final assembly before completing the purchase rather than assuming that an American brand name automatically means the vehicle qualifies. Where a vehicle was assembled—not simply the automaker’s headquarters or brand identity—is what matters for this requirement.

Lenders Will Have New Reporting Requirements

The final regulations also establish reporting requirements intended to help taxpayers document the interest they paid. A lender or other qualifying business that receives $600 or more in interest during a calendar year from an individual on a specified passenger vehicle loan generally must file an information return with the IRS and furnish a statement to the borrower.

The reporting requirements are established under new Internal Revenue Code Section 6050AA. Businesses required to file at least 10 information returns of any type during a calendar year generally must file electronically under the applicable IRS rules.

These reporting requirements should eventually give qualifying borrowers documentation that can help them determine the interest associated with an eligible vehicle loan.

Don’t Buy a More Expensive Car Just for the Tax Deduction

The new deduction can reduce the after-tax cost of borrowing for someone who already needs a qualifying vehicle, but it shouldn’t make an unaffordable car loan suddenly affordable. Consider someone who pays $4,000 in qualifying car loan interest and is able to deduct the entire amount. The financial benefit is the tax savings produced by that $4,000 deduction—not reimbursement of the $4,000 of interest.

Vehicle price, interest rate, loan term, insurance, maintenance, depreciation and the monthly payment can still matter far more to a household budget than the deduction. The tax break is also scheduled to disappear after 2028 unless Congress extends it, while a five-, six- or seven-year auto loan could continue long after the deduction expires.

For shoppers comparing vehicles, the better question isn’t simply, “Does this car qualify for the deduction?” It’s whether the total cost of the vehicle and financing still makes sense without counting on a temporary tax break.

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Paid IRS Penalties During the Pandemic? You May Be Able to Get Some Money Back

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Paid IRS Penalties During the Pandemic? You May Be Able to Get Some Money Back
A taxpayer reviews an old IRS notice and tax account for possible COVID-era penalty relief, including refunds or credits for certain eligible 2020 and 2021 penalties – Shutterstock

The pandemic created a spectacular mess of ordinary life, and taxes did not exactly escape the chaos. If you paid certain IRS penalties tied to your 2020 or 2021 taxes, you may qualify to get that money back through automatic penalty relief the IRS announced after the worst of the disruption had passed.

Not every pandemic-era tax penalty qualifies, and it certainly does not mean the IRS will send a check simply because the calendar once contained the word 2020. The relief comes with specific rules about the tax year, type of penalty, tax amount, and IRS notices, so checking the details matters before counting that refund money as found cash.

The IRS Gave Some Pandemic Penalties a Second Look

The IRS created special relief for certain taxpayers who faced failure-to-pay penalties for tax years 2020 and 2021. Under Notice 2024-7, the agency agreed to waive eligible penalties and refund or credit penalties that taxpayers had already paid.

The automatic relief generally covers individuals, businesses, estates, trusts and certain tax-exempt organizations that filed qualifying returns and had assessed tax below $100,000 for the applicable year. For individuals, qualifying returns generally include Form 1040-series returns, while certain businesses and organizations qualify through other specified forms.

The timing of the IRS notice also matters, because the automatic relief targeted taxpayers who received an initial balance-due notice, generally a CP14 or CP161, between February 5, 2022, and December 7, 2023. The IRS designed the program around taxpayers who entered the collection process after the agency temporarily paused certain collection notices during the pandemic.

If a taxpayer already paid the eligible penalty, the IRS can apply the money toward another outstanding federal tax liability or issue a refund when no other balance remains. In other words, a taxpayer who already handed over the money did not necessarily lose the chance to benefit from the relief.

Not Every Pandemic-Era Penalty Qualifies

Here comes the fine print, because taxes always seem to keep a tiny trapdoor hidden beneath the carpet. The 2020 and 2021 automatic relief primarily addresses certain failure-to-pay penalties, not every penalty that appeared on an IRS account during those years.

The IRS also offered separate relief under Notice 2022-36 for certain failure-to-file penalties involving eligible 2019 and 2020 returns filed by September 30, 2022. That program also allowed eligible penalties that taxpayers had already paid to receive refunds or credits, but the filing deadline for that particular relief has long since passed. That means a taxpayer should not lump every old IRS charge into one big “COVID penalty” bucket. A failure-to-file penalty, failure-to-pay penalty, estimated-tax penalty, and other IRS charges can follow different rules, and the notice attached to the charge can reveal exactly what happened.

There are also exclusions from the automatic 2020 and 2021 relief, including situations involving assessed tax of $100,000 or more and certain cases involving fraud, accepted offers in compromise, closing agreements or court-determined penalties. Taxpayers outside the automatic program may still qualify for other forms of penalty relief, including reasonable-cause relief or the First-Time Abate program, depending on their circumstances.

So, before celebrating over a hypothetical IRS windfall, identify the exact penalty first. A five-minute review of the tax account can prevent a lot of unnecessary optimism.

How to Check Whether the IRS Owes You

The easiest starting point involves the taxpayer’s IRS Online Account and tax records. The IRS says taxpayers can review account information and transcripts to see details connected to the penalty relief, which can help determine whether the agency already adjusted the account.

Look for an IRS notice or account entry showing an adjustment, refund or credit connected with the affected tax year. If another federal tax balance exists, the IRS may apply the money to that balance instead of sending a separate check, so a missing check does not automatically mean the relief disappeared.

A taxpayer who changed addresses should pay particular attention to the mailing information on file. The IRS notes that taxpayers may need to update their address to receive refunds or notices, and the agency generally mails a refund when the taxpayer did not request direct deposit on the original return.

If the account does not make sense, the next step involves contacting the IRS or reviewing the original penalty notice rather than guessing. Keep copies of the return, IRS notices, payment records and account information handy, especially when a taxpayer needs to challenge a penalty that falls outside the automatic program.

And there is one reassuring detail: eligible taxpayers did not need to submit a special application for the automatic 2020 and 2021 relief. The IRS handled that relief automatically, although taxpayers still need to pay attention to later notices and respond to unrelated tax issues when required.

The Old Tax Bill Could Still Have One More Surprise

For anyone who paid an eligible pandemic-era penalty, checking the IRS account could uncover money that never felt like a refund because the agency used it as a credit. That makes this less of a “wait for a mysterious check” situation and more of an account-reconciliation exercise. The IRS specifically says it can credit previously paid penalties toward another outstanding tax liability or issue a refund when appropriate.

The bigger lesson involves keeping old tax records even after the annual filing frenzy fades. Tax problems can linger for years, and an old IRS notice can suddenly become important when the agency changes how it handles a particular penalty. If the automatic relief does not cover the penalty, that does not necessarily end the conversation. The IRS allows certain taxpayers to request penalty relief based on reasonable cause, and taxpayers may qualify for First-Time Abate in appropriate circumstances.

In short, a pandemic-era IRS penalty deserves a second glance before it gets forgotten in the filing cabinet forever. If an eligible penalty already drained money from the household budget, the IRS may have an adjustment waiting that puts at least some of it back where it belongs.

Did you pay an IRS penalty during the pandemic and later discover that you qualified for penalty relief, or did the IRS automatically refund or credit the money? Share what happened in the comments.

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Tax Deadlines Extension Filers Should Put on Their Calendar Now

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Tax Deadlines Extension Filers Should Put on Their Calendar Now
Extension filers should mark Oct. 15, 2026, as the federal filing deadline while also watching Sept. 15 for the third estimated tax payment. An extension gives more time to file, not more time to pay – Shutterstock

An October tax deadline can look deceptively far away on a calendar. For taxpayers who requested an extension for their 2025 federal return, however, Oct. 15, 2026, now sits close enough to deserve a bright red circle, because the extra time only extends the deadline to file, not the deadline to pay what was already owed.

That distinction can turn a calm September into a frantic October if it slips through the cracks. The good news is that extension filers do not need to wait for the calendar to reach Halloween season before dealing with their return, and a few well-placed reminders can make the whole process considerably less dramatic.

October 15 Is the Big Date, But It Shouldn’t Be the Only One on the Calendar

For most individuals who requested a timely federal extension, Oct. 15, 2026, marks the deadline to file the 2025 federal income tax return.
That date matters even if the return still needs a professional review, a missing document, or one last trip through the calculator. Putting Oct. 15 on the calendar now creates a useful target instead of treating the deadline like a surprise guest who suddenly appears at the door.

The smarter move involves setting an earlier personal deadline, such as late September, to leave room for mistakes or missing paperwork. A tax return rarely becomes more enjoyable because someone waits until the final evening, so getting the bulk of the work done early gives extension filers a much better shot at a clean, accurate submission.

An Extension Buys Filing Time, Not Payment Time

The IRS makes one point especially clear: an extension gives taxpayers additional time to file, but it does not give them additional time to pay taxes they owed for the year.  In other words, the extension works more like an extra filing lane than a pause button for the tax bill.

Anyone who still owes money should review the account, estimate the remaining balance, and pay as much as possible rather than assuming Oct. 15 resets everything. The IRS also offers payment options for taxpayers who cannot pay the full balance, so an intimidating bill does not automatically mean someone should ignore the problem and hope it disappears.

September 15 Deserves Its Own Calendar Alert

September brings another important tax date that can sneak up on people who focus exclusively on their extended annual return. For individuals who make estimated tax payments, Sept. 15, 2026, marks the due date for the third installment of 2026 estimated taxes. That deadline involves 2026 tax payments, while the Oct. 15 deadline concerns filing the 2025 federal return, so they serve completely different purposes.

Self-employed taxpayers and others who make quarterly estimated payments should keep those two tax tasks separate rather than tossing them into one giant mental folder labeled “tax stuff.” A calendar reminder for Sept. 15 can prevent a surprisingly easy mistake, especially when the extended 2025 return still occupies most of the attention.

Give the Tax Return a Pre-October Checkup

Extension filers should use September to gather every document, receipt, form, and record needed to finish the return accurately. The IRS specifically encourages taxpayers to gather and review their tax documents and notes that an Individual Online Account can provide access to account information, transcripts, payments, and other useful records. That checkup can also reveal a missing form or discrepancy while there still remains time to track down the problem.

Taxpayers who qualify can use IRS Free File, while Free File Fillable Forms remain available to taxpayers who prefer to prepare their own returns. For anyone working with a tax professional, September also offers a valuable chance to ask questions, provide missing paperwork, and resolve issues before the calendar starts shouting “October 15!” from every corner of the desk.

Don’t Assume Every Taxpayer Gets the Same October Deadline

Oct. 15 serves as the standard federal deadline for many individual extension filers, but certain taxpayers may qualify for additional time because of specific circumstances. The IRS notes that taxpayers affected by federally declared disasters can receive different filing deadlines, while certain military personnel and eligible support personnel can receive special deadline treatment. Those exceptions make it especially important to check the taxpayer’s specific situation rather than relying on a generic calendar reminder.

State tax agencies can also follow different filing and payment deadlines, so a federal extension does not automatically settle every state tax obligation.
Anyone who filed for a federal extension should check the applicable state rules as well, because nothing ruins a satisfying “taxes are done” moment quite like discovering a second deadline hiding in the paperwork.

The Best Tax Deadline Is the One That Doesn’t Sneak Up

The easiest way to handle an extension involves turning one intimidating date into several smaller checkpoints. A useful calendar could flag Sept. 15 for estimated taxes when applicable, late September for a document and return review, early October for a final accuracy check, and Oct. 15 for the federal filing deadline. That approach leaves time to deal with missing information instead of forcing every problem into one stressful week.

Most importantly, extension filers should remember what the extra time actually provides: more time to prepare and submit the return, not a free pass to postpone tax payments. With the important dates sitting visibly on the calendar, October 15 can become a finish line instead of a five-alarm tax emergency.

What tax deadline has caused the biggest scramble in your household, and what calendar trick finally helped keep it under control?

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IRS Proposes New Investment Rules for Trump Accounts: What Parents Need to Know

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Trump Account investment rules
The IRS and Treasury Department proposed new rules on August 20 governing investments in Trump Accounts for children. During the accounts’ growth period, funds generally would be limited to qualifying low-cost mutual funds and ETFs that track indexes made up primarily of U.S. companies. fizkes/Shutterstock

The IRS has proposed new rules governing how money in Trump Accounts for children can be invested, including strict limits on fund fees, leverage and the types of stock indexes the investments can track.

The Department of the Treasury and Internal Revenue Service issued the proposed regulations on August 20 as part of the ongoing rollout of Trump Accounts, a new type of traditional individual retirement account created for eligible children under the Working Families Tax Cuts.

During a child’s account “growth period,” families won’t have unlimited freedom to choose stocks, cryptocurrencies or other investments. Instead, money generally must remain in qualifying low-cost mutual funds or exchange-traded funds, or ETFs, that meet federal requirements.

The IRS says the restrictions are designed to encourage investment in low-fee funds that can potentially compound over many years.

What Investments Would Be Allowed in a Trump Account?

Under the proposed rules, an eligible investment generally must be a mutual fund or ETF that tracks an equity index composed primarily of U.S. companies.

The IRS points to an index such as the S&P 500 as an example.

The fund also cannot use leverage and generally cannot charge annual fees and expenses exceeding 0.1% of the amount invested in the fund.

That fee limit is equivalent to no more than about $1 annually for every $1,000 invested, although the actual dollar amount would change as the account balance changes.

The rules therefore steer Trump Accounts during childhood toward relatively low-cost, index-based investments rather than allowing families to select virtually any security they want.

What Happens If Parents Don’t Choose an Investment?

Families also won’t necessarily have to select a fund themselves.

According to the IRS announcement on the proposed investment regulations, if the beneficiary doesn’t select an eligible investment from the choices offered by the account trustee, the money will automatically be placed in an eligible investment selected by that trustee during the growth period.

The proposed regulations include procedures trustees would use to determine whether an investment meets the government’s requirements and to ensure Trump Account money remains invested appropriately.

Those restrictions don’t last forever.

The growth period begins when the beneficiary’s initial Trump Account is established and ends on December 31 of the calendar year in which the beneficiary turns 17. After that period ends, the special eligible-investment restrictions no longer apply, and most traditional IRA rules generally take over.

Some Children Can Receive a $1,000 Federal Contribution

A separate pilot program provides a one-time $1,000 Treasury contribution for certain children.

The IRS guidance on the Trump Account pilot program says an eligible child must be a U.S. citizen with a valid Social Security number who was born in 2025, 2026, 2027 or 2028, and an election must be made for the child.

Parents and other qualifying individuals can make the election using Form 4547, Trump Account Election(s).

The August IRS announcement says parents, guardians and other authorized individuals can use the IRS Individual Online Account to complete Form 4547 for a child with a Social Security number, provided the election is made before the calendar year in which the child turns 18.

For an eligible child born during the pilot-program years, the person making the election can check the applicable box on Form 4547 to request the $1,000 contribution.

Families Can Put Additional Money Into the Account

The $1,000 pilot contribution isn’t necessarily the only money that can go into a Trump Account.

IRS guidance says ordinary contributions from sources such as family members and friends generally count toward a $5,000 annual contribution limit during the growth period, with that limit subject to cost-of-living adjustments after 2027.

The $1,000 federal pilot contribution doesn’t count against that $5,000 limit.

Certain other types of contributions receive different treatment as well. For example, the IRS issued separate proposed regulations in August covering employers that choose to contribute to Trump Accounts for employees or their dependents.

The IRS employer-contribution guidance says qualifying employer contributions can be as much as $2,500 annually during the growth period, subject to the applicable rules and limits.

Parents Should Understand the Withdrawal Restrictions

Families should also understand that a Trump Account isn’t designed to function like an ordinary savings account for childhood expenses.

During the growth period, distributions generally aren’t allowed except for limited circumstances identified by the IRS, including certain rollovers, qualified rollovers to an ABLE account at age 17, distributions of excess contributions and distributions following the beneficiary’s death.

After the growth period, most traditional IRA rules generally apply.

That means distributions can potentially be subject to the 10% additional tax on early withdrawals unless an exception applies. IRS guidance identifies qualified higher-education expenses and certain first-home purchases as examples of situations in which an exception may be available.

Parents considering the account should therefore distinguish between money they want to invest for the child’s longer-term future and money they may need for ordinary expenses while the child is still growing up.

The Investment Rules Aren’t Final Yet

The August 20 regulations are proposed, which means the details aren’t being presented as final regulations yet.

Treasury and the IRS developed the proposal after considering stakeholder comments submitted in response to Notice 2025-68, which was issued in December 2025.

The agencies are now requesting another round of public feedback.

Comments on the proposed eligible-investment regulations are due by October 20, 2026, with submission instructions contained in the proposed regulations.

The IRS says the regulations generally are proposed to apply to tax years beginning on or after January 1, 2026.

For families considering a Trump Account, the proposal provides a clearer picture of how the accounts are intended to operate during childhood: money generally would be directed into low-cost, primarily U.S. stock-index mutual funds or ETFs, while access to the funds would remain restricted until the special childhood growth period ends.

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IRS Is Shutting Down the FIRE Filing System Nov. 19 — What Businesses Need to Do Before 2027

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IRS FIRE system retirement
The IRS will stop accepting information returns through its FIRE system on November 19, 2026, at 3 p.m. ET. Current FIRE users will need a separate IRIS Transmitter Control Code to electronically file tax year 2026 information returns during the 2027 filing season. A9 STUDIO/Shutterstock

The IRS is warning businesses, tax professionals and other information-return filers that its long-running FIRE electronic filing system is approaching its final shutdown, with the last opportunity to submit information returns through the platform coming in November 2026.

Beginning with the 2027 filing season, filers who previously used the Filing Information Returns Electronically system, commonly known as FIRE, will need to transition to the newer Information Returns Intake System, or IRIS, to electronically file tax year 2026 information returns.

The IRS announced the latest transition details in an August 24 reminder and is encouraging current FIRE users to prepare before the shutdown rather than waiting until filing deadlines approach.

The Final FIRE Filing Deadline Is November 19

The IRS has established several important dates for current FIRE users. November 1, 2026, is the last day filers can submit test information returns through the FIRE Trading Partner Test System. November 9 is the final day to make changes to existing Information Returns Applications for Transmitter Control Codes, or TCCs.

Most importantly, November 19, 2026, at 3 p.m. Eastern Time is the last day information returns can be filed through FIRE. After the November maintenance window, the system will no longer accept information-return submissions. Beginning after January 1, 2027, IRIS will be the IRS’s only electronic filing system for information returns previously handled by FIRE, including current-year returns, prior-year returns and corrections.

Current FIRE Users Need a New IRIS TCC

Filers shouldn’t assume their existing FIRE credentials will automatically carry over to IRIS. The IRS says current FIRE users must complete an IRIS Application for Transmitter Control Code before filing through the new platform. Transmitter Control Codes aren’t interchangeable between the different IRS intake systems, meaning a FIRE TCC can’t simply be used to submit returns through IRIS.

That’s one reason the IRS is encouraging businesses, tax professionals and other affected filers to begin the transition now. The change is particularly important for organizations that electronically submit large volumes of information returns, including many forms in the 1099 series.

Employers should note that W-2 series forms follow a different process and are filed electronically with the Social Security Administration rather than through FIRE or IRIS. Other specialized information returns can also use different filing systems, so filers should verify which IRS or federal platform applies to the specific forms they submit.

IRIS Offers Two Ways to Submit Information Returns

IRIS isn’t entirely new. The IRS introduced the system in 2023 and has gradually expanded it as part of the transition away from FIRE.

The first filing option is the IRIS Taxpayer Portal, a free web-based system that allows users to electronically file up to 100 returns at a time. Filers can manually enter information or upload it through a CSV file, download copies for recipients and maintain records of completed and submitted forms.

For businesses, payroll processors, tax professionals and other filers handling larger volumes, the IRS also offers IRIS Application to Application, commonly called A2A.

That option allows filers using third-party software—or organizations that develop their own software—to transmit larger volumes of information returns directly through IRIS.

Beginning in 2027, the IRS says all forms previously supported through FIRE will be available through IRIS.

Waiting Until Filing Season Could Create Problems

The transition matters because tax year 2026 information returns will generally be filed during the 2027 filing season, when FIRE will no longer be available as a fallback.

A business or tax professional who discovers in January that an existing FIRE TCC doesn’t work with IRIS could therefore face unnecessary delays while trying to complete the new registration and filing process.

The IRS recommends that current FIRE users complete their IRIS TCC application, review available IRIS filing guidance and begin preparing for the transition before FIRE shuts down.

Filers can also subscribe to IRIS QuickAlerts for information about system changes and maintenance. The IRS holds IRIS Working Group meetings on the second Wednesday of each month, although participants must register each month to receive the meeting link.

The agency says it will continue providing transition information through those working groups, QuickAlerts and IRS.gov as the final FIRE shutdown approaches.

For businesses and tax professionals that still rely on FIRE, the key takeaway is simple: November 19 at 3 p.m. ET is the end of the road for FIRE submissions, and an existing FIRE TCC isn’t enough to start filing through IRIS in 2027. Preparing the new IRIS access now could prevent a last-minute filing problem when tax season arrives.

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IRS interest rates 2026
The IRS will keep its interest rate on individual tax underpayments and overpayments at 7% annually, compounded daily, for the fourth quarter beginning October 1, 2026. Pixel-Shot/Shutterstock

Taxpayers carrying an unpaid federal tax balance will continue facing a 7% annual interest rate through the end of 2026.

The Internal Revenue Service announced August 21 that interest rates will remain unchanged for the calendar quarter beginning October 1, 2026. For individuals, both tax underpayments and overpayments will carry a 7% annual rate, compounded daily.

That means taxpayers who owe the IRS should not expect interest costs to become cheaper during the final three months of the year. On the other hand, taxpayers entitled to interest on certain delayed refunds will continue receiving the same 7% rate.

What the 7% IRS Interest Rate Means for Taxpayers

Interest can become important when someone files a tax return but cannot immediately pay the entire balance due. The IRS generally charges interest on unpaid taxes, and because that interest compounds daily, delaying payment can steadily increase the amount owed.

The fourth-quarter rate applies from October 1 through December 31, 2026. The IRS calculates rates quarterly, so the percentage can rise or fall in subsequent quarters depending on changes in the federal short-term rate.

For taxpayers other than corporations, the underpayment and overpayment rates are calculated using the federal short-term rate plus three percentage points. The IRS said the fourth-quarter rates were based on the federal short-term rate determined during July 2026.

The Rate Isn’t Increasing From the Previous Quarter

The announcement does not represent a new increase for taxpayers. Individual overpayments and underpayments were already subject to a 7% rate during the third quarter of 2026, covering July through September.

That distinction may be useful for consumers who see headlines about a “7% IRS interest rate” and assume a new increase is taking effect in October. Instead, the agency is maintaining its existing rate.

IRS rates have moved during 2026. The individual rate was 7% during the first quarter, fell to 6% for the second quarter and returned to 7% for the third quarter before remaining there for the fourth.

Overpayments Can Earn Interest Too

Interest does not work exclusively against taxpayers. The IRS can also pay interest on qualifying overpayments when taxpayers have paid more than they owe and the government does not issue the refund within the applicable time period.

For individuals, the fourth-quarter overpayment rate will also remain 7% annually, compounded daily. However, taxpayers should not interpret that as meaning every tax refund automatically earns 7% interest. Whether interest is owed depends on the circumstances and timing surrounding the refund.

The IRS describes an overpayment as a payment made in excess of the amount owed.

Corporations Have Different Interest Rates

Businesses should pay attention to a separate set of numbers. For the fourth quarter, the corporate overpayment rate will be 6%, while the rate on the portion of a corporate overpayment exceeding $10,000 for a taxable period will be 4.5%.

The general underpayment rate remains 7%, while large corporate underpayments are subject to a substantially higher 9% rate.

These differences result from formulas established under the Internal Revenue Code. Generally, corporate overpayments use the federal short-term rate plus two percentage points, while large corporate underpayments use the federal short-term rate plus five percentage points.

Owing the IRS Can Become More Expensive the Longer You Wait

For households, the practical takeaway is straightforward: a tax balance that remains unpaid can continue accumulating interest even though the fourth-quarter rate isn’t increasing.

Taxpayers who discover they owe money after filing should therefore avoid assuming that waiting until the next quarter will automatically produce a lower interest rate. IRS rates are recalculated quarterly, and future rates can move in either direction.

The complete fourth-quarter calculations are contained in Revenue Ruling 2026-15, which the IRS says will appear in Internal Revenue Bulletin 2026-36 dated August 31, 2026. Taxpayers who need information about their own balances, payment options or interest charges can use IRS.gov or consult a qualified tax professional.

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IRS Proposes New Eligibility Rules for Refundable Payments From 4 Tax Credits

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IRS refundable tax credit proposal
The IRS and Treasury have proposed regulations that would change eligibility for the refundable portions of four federal tax credits. The proposal has not yet taken effect. Tada Images/Shutterstock

The Internal Revenue Service and the Department of the Treasury have issued a notice of proposed rulemaking that would classify the refunded portion of certain federal refundable tax credits as a “Federal public benefit” under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA). The proposal was published in the Federal Register on August 20, 2026.

Four Tax Credits Would Be Affected

Under the proposed rule, individuals who are not considered “qualified aliens” under PRWORA would become ineligible to receive the refundable portion of four specific federal income tax credits: the adoption tax credit, the American Opportunity Tax Credit, the child tax credit, and the earned income credit. The non-refundable portions of these credits are not addressed by the proposal; only the amounts that would otherwise be paid out as a refund to the taxpayer are at issue.

Who Would Meet the Proposed Eligibility Standard?

PRWORA, enacted in 1996, generally restricts certain federal public benefits based on immigration status. Its definition of a “qualified alien” includes categories such as lawful permanent residents, refugees, asylees, and certain other noncitizens who meet statutory requirements. Because immigration classifications can be complicated, taxpayers should not determine their eligibility based solely on a general list in a news article.

The Proposal Applies to Refundable Amounts, Not Every Dollar of the Credit

The IRS stated it is issuing the proposed rule under authority granted by section 7805(a) of the Internal Revenue Code, as well as section 404 of PRWORA, which requires federal agencies administering a federal public benefit to notify the public and benefit recipients of any eligibility changes.

The proposed rule is identified as REG-119882-25 and covers amendments to 26 CFR Part 1 under Internal Revenue Code sections 23, 24, 25A, and 32, which govern the adoption tax credit, child tax credit, American Opportunity Tax Credit, and earned income credit, respectively.

The distinction between a refundable and nonrefundable tax credit matters. A nonrefundable credit can generally reduce the federal income tax someone owes, while a refundable amount can potentially result in money being paid to the taxpayer beyond their income-tax liability. Under the proposal, it is the refunded portion of the affected credits that would be treated as a federal public benefit under PRWORA. The proposal therefore should not be described as making affected taxpayers completely ineligible for all four tax credits.

Nothing Changes for Taxpayers Yet

The IRS has set a public comment deadline of October 5, 2026. A public hearing has been scheduled for October 14, 2026, though it will be cancelled if no requests to speak are received by the October 5 deadline. Requests to attend the hearing must be submitted by 5 p.m. ET on October 9, 2026. Comments may be submitted electronically through the federal rulemaking portal at regulations.gov using docket number REG-119882-25, or by mail to the IRS address specified in the Federal Register notice.

The proposal could be particularly important for households that qualify for refundable credits even when their federal income-tax liability is relatively low. For example, someone might use part of an eligible credit to reduce their tax liability to zero and potentially receive another portion as a refund. Under the proposed framework, PRWORA eligibility would affect the refunded amount rather than automatically eliminating the entire underlying credit. Taxpayers should not change how they file based solely on the proposal because it has not been finalized.

Because this is a proposed rule, it has not yet taken effect. Taxpayers and advisors who may be affected by changes to eligibility for these credits should monitor the rulemaking process and verify their specific circumstances directly with the IRS or a qualified tax professional.

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IRS Proposes New Restrictions on Refundable Tax Credits for Some Immigrants

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IRS refundable tax credit proposal
Treasury and the IRS are proposing new eligibility rules for the refundable portions of four federal tax credits, including the Child Tax Credit and Earned Income Tax Credit. The proposal has not yet been finalized. sasirin pamai/Shutterstock

The Department of the Treasury and the Internal Revenue Service have issued proposed regulations that would clarify eligibility requirements for the refunded portions of certain individual income tax credits, according to an official IRS announcement designated IR-2026-93.

The proposed rules seek to strengthen enforcement of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), a federal law that limits access to federal public benefits to U.S. citizens, U.S. nationals, and qualified aliens. Treasury and the IRS are now proposing that the refunded portions of certain refundable tax credits constitute federal public benefits under that law.

Four Tax Credits Are Included in the Proposal

Four specific tax credits are covered by the proposal: the adoption tax credit, the child tax credit, the American Opportunity Tax Credit, and the Earned Income Tax Credit (EITC). Importantly, the proposed rules apply only to the refunded portion of these credits — defined as the amount by which the combined eligible credits exceed a taxpayer’s income tax liability for the year. Taxpayers who do not qualify to receive the refunded portion may still use the non-refunded portion of an applicable credit to offset their income tax liability, according to the announcement.

The proposal follows a legal analysis by the Department of Justice’s Office of Legal Counsel concluding that refunded portions of the affected credits qualify as federal public benefits under PRWORA. Treasury Secretary Scott Bessent and IRS Chief Executive Officer Frank J. Bisignano both issued statements indicating the rules are intended to direct these benefits to eligible taxpayers and protect the integrity of the tax system.

This would not necessarily eliminate the entire value of an affected tax credit for someone who does not meet the proposed eligibility requirements. Treasury and the IRS are distinguishing between the portion used to reduce federal income tax liability and the refundable amount that can result in money being paid to a taxpayer beyond that liability. The proposed PRWORA restrictions would apply to the latter.

The Rules Are Not in Effect Yet

If finalized, the regulations would take effect for tax years ending on or after the date the final regulations are published. No final effective date has been set, as the rules are still in the proposed stage.

Treasury and the IRS have invited public comments and requests for a public hearing on all aspects of the proposed regulations. Instructions for submitting comments are included in the proposed regulations.

The EITC in particular is widely used by lower- and middle-income working households, making these proposed changes potentially significant for a broad segment of taxpayers and tax filers who claim refundable credits.

Readers with questions about their specific eligibility for any of the affected credits should consult the IRS website at IRS.gov or speak with a qualified tax professional, as individual circumstances vary.

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Tax Breaks Workers May Be Missing in Their 2026 Paycheck Withholding

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Tax Breaks Workers May Be Missing in Their 2026 Paycheck Withholding
New 2026 tax deductions for qualified tips, overtime and certain car-loan interest could affect how much federal income tax workers need withheld from their paychecks. The IRS Tax Withholding Estimator can help workers check their numbers and decide whether a W-4 adjustment makes sense – Shutterstock

A handful of new 2026 tax breaks could put more money back into some workers’ pockets, but there is a catch: your paycheck may not automatically reflect every tax break you can claim. The IRS now recognizes deductions for qualified tips, certain overtime pay, qualifying car-loan interest, and an enhanced deduction for eligible seniors, while the standard deduction also increased for 2026.

That creates an easy-to-miss situation where a worker qualifies for a tax break but continues having federal income tax withheld without accounting for it. The money is not necessarily lost, but waiting until tax-filing season may mean waiting months to benefit from a deduction that could have influenced withholding during the year.

Your Paycheck May Not Know About Every New Tax Break

The key word here is “deduction,” not magic. A qualifying deduction can reduce taxable income when you file, but workers who want their withholding to better reflect those deductions need to make sure their Form W-4 information matches their circumstances.

The IRS updated its Tax Withholding Estimator in 2026 to account for the new deductions, including qualified tips, qualified overtime, qualifying car-loan interest, and the enhanced deduction for seniors. The estimator can then recommend whether a worker should adjust withholding through a new Form W-4.

That does not mean everyone should rush to change a W-4. Withholding too little can create an unpleasant tax bill later, while withholding too much can leave money sitting with the government instead of in the worker’s checking account.

Tip Earners Have a New Deduction to Check

Workers who receive qualifying tips may claim a deduction for those tips under the new rules, but several conditions apply. The IRS says the deduction covers qualified tips received in occupations that the agency identified as customarily and regularly receiving tips on or before December 31, 2024, and the tips must appear on the appropriate tax reporting documents or otherwise meet the reporting requirements.

The maximum annual deduction reaches $25,000, with a phaseout beginning at modified adjusted gross income above $150,000 for single filers and $300,000 for joint filers. Certain specified service businesses and their employees do not qualify, so a worker should not assume that every dollar labeled “tip” receives special treatment.

There is another important wrinkle: “no tax on tips” does not mean the tips vanish from taxable-income calculations or stop appearing on wage and income records. Workers still need to report their income properly, and the deduction applies only to qualified tips that meet the rules.

Overtime Can Qualify, but Not Every Overtime Dollar

The overtime deduction works differently than many catchy headlines suggest. For qualified overtime, the deduction generally applies to the portion above the employee’s regular rate, such as the extra half of time-and-a-half, rather than automatically wiping out income from every overtime hour.

The annual deduction reaches $12,500 for an individual or $25,000 for joint filers, and the benefit phases out above $150,000 of modified adjusted gross income for single filers or $300,000 for joint filers. Qualified overtime also must meet the applicable reporting requirements, so workers should keep an eye on their pay statements and year-end tax documents instead of guessing from the gross overtime amount.

For example, someone who earns time-and-a-half cannot simply treat the entire overtime paycheck as deductible. The distinction matters, because “no tax on overtime” sounds wonderfully simple until the tax code arrives carrying a calculator and several footnotes.

Car-Loan Interest and The Bigger Paycheck Question

A newer deduction also targets interest on certain qualifying personal vehicle loans. For loans that meet the rules, taxpayers can deduct up to $10,000 of qualifying interest annually, but the vehicle must meet requirements that include a loan originating after December 31, 2024, personal use, a lien securing the loan, and final assembly in the United States.

The deduction phases out above $100,000 of modified adjusted gross income for single filers and $200,000 for joint filers, and lease payments do not qualify. The IRS also says taxpayers must include the vehicle identification number on the return when claiming the deduction, while the vehicle must fall within the specified vehicle categories and have a gross vehicle weight rating below 14,000 pounds.

That makes this a classic case where a quick glance at a car loan statement is not enough. A borrower needs to confirm that the loan, vehicle and personal circumstances all fit the requirements before counting on the deduction.

The Smartest Paycheck Move May Take 25 Minutes

The IRS recommends using its Tax Withholding Estimator to check whether current withholding lines up with expected income and deductions. The updated estimator can account for the 2026 changes and use paycheck information, withholding, deductions and other tax details to estimate whether a worker should adjust a W-4.

A worker should have a recent pay statement handy and, ideally, the most recent federal tax return as well. The IRS says the estimator takes about 25 minutes on average, although simpler situations can take less time, and it can provide instructions for changing withholding through Form W-4.

The goal should not automatically become “make the paycheck as large as possible.” The better goal is to get withholding reasonably close to the actual tax bill, avoiding both an unnecessarily tiny paycheck and a nasty surprise when the return comes due.

A Little Paycheck Detective Work Can Pay Off

The 2026 rules create several legitimate opportunities, but none of them come with a universal “tax break” button. Qualified tips, qualified overtime, eligible car-loan interest and the enhanced senior deduction each carry their own eligibility rules, income limits and reporting requirements.

That makes the humble pay stub surprisingly useful. Check federal income-tax withholding, look at year-to-date figures, gather records for overtime, tips or qualifying vehicle-loan interest, and then run the numbers through the IRS estimator before changing a W-4.

A few minutes of tax housekeeping now could make the rest of 2026 a lot more predictable. And predictable money is generally much more fun than discovering a tax surprise while trying to enjoy a perfectly innocent cup of coffee.

Do any of these 2026 tax breaks apply to your paycheck, and are you planning to change your withholding this year?

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