The 2026 U.S. tax filing season has officially begun, bringing several significant changes that could impact individuals, families, and small business owners—including members of the Nepali community across America.
In an interview on the Community Cornerstone program, CPA Raj Biraj Rijal outlined key updates introduced under the new federal tax law signed by President Donald Trump, explaining how the changes affect deductions, credits, overtime income, digital payments, and cryptocurrency reporting.
SALT Deduction Cap Raised
One of the most notable changes is the increase in the State and Local Tax (SALT) deduction cap. Previously limited to $10,000 for itemized deductions, the cap has now been raised to $40,000. According to Rijal, this change particularly benefits taxpayers living in high-tax states who were previously constrained by the lower limit.
Standard Deduction and Tax Brackets Adjusted
Tax brackets remain structurally the same, but income thresholds have been adjusted upward due to inflation. For example, the 10 percent bracket now applies to income up to approximately $12,000, compared to about $10,000 previously.
The standard deduction has also increased due to inflation adjustments, rising to roughly $15,750 for single filers and about $31,500 for married couples filing jointly.
“These are largely inflation-based adjustments, not entirely new benefits,” Rijal clarified.
Child Tax Credit Increased
The Child Tax Credit has been raised from $2,000 to $2,200 per qualifying child. Of that amount, up to $1,700 is refundable, meaning eligible taxpayers can receive that portion even if they owe no federal income tax.
Rijal emphasized the importance of understanding the distinction between refundable and non-refundable credits when calculating potential refunds.
New Savings Account for Newborns
A new retirement-style savings program—informally referred to as a “Trump Account”—has been introduced for children born between January 1, 2025 and December 31, 2028.
Under the provision, eligible newborns may receive a $1,000 seed contribution if an account is opened. Parents may contribute up to $5,000 annually. Rijal advised families to properly indicate newborn information during tax filing to ensure eligibility once account registration becomes available.
Overtime and Tip Income Deductions
The new law also introduces deductions related to overtime and tip income.
For tipped workers—common in hospitality, rideshare, and service industries—up to $25,000 in tip income may be deductible from federal income tax. However, Social Security and Medicare taxes still apply.
Similarly, single filers may deduct up to $12,500 in qualifying overtime premium income, while married couples filing jointly may deduct up to $25,000. Rijal clarified that only the premium portion of overtime pay—the extra half-time amount—qualifies for deduction, not the full overtime wage.
He urged employers to properly categorize tips and overtime on W-2 forms to ensure workers can benefit from the deductions.
New Schedule 1A Introduced
A new Schedule 1A form has been created to report several of the newly introduced deductions. These include overtime deductions, tip deductions, senior deductions of $6,000 for single filers and $12,000 for married filers, and up to $10,000 in auto loan interest for U.S.-assembled vehicles.
Digital Payments Still Reportable
With the growing use of Venmo, Zelle, and PayPal, Rijal cautioned taxpayers against assuming income is exempt if they do not receive a 1099-K form.
Although the federal reporting threshold has reverted to $20,000 and 200 transactions, some states maintain lower reporting requirements. Regardless of whether a form is issued, business income must still be reported.
Taxpayers are encouraged to maintain clear records and distinguish personal reimbursements from taxable business income.
Cryptocurrency Reporting Rules
Rijal also addressed cryptocurrency reporting requirements. Purchasing digital assets does not trigger tax reporting, but selling cryptocurrency—or converting one coin into another—does constitute a taxable event.
Beginning next year, brokers are expected to issue Form 1099-DA for digital asset transactions. Rijal warned that failure to report transactions may result in tax bills calculated on gross sales without accounting for original purchase cost.
IRS Scams and Notices
Amid tax season, Rijal also warned about fraudulent calls and emails posing as the IRS. He stressed that the Internal Revenue Service does not initiate contact through threatening phone calls demanding immediate payment.
Official communication is typically sent by mail. Taxpayers who receive a notice can verify its legitimacy by checking their IRS online account or consulting a tax professional.
“Do not panic,” Rijal advised. “Many IRS letters simply request clarification or documentation.”
Common Filing Mistakes
Based on his experience working with the Nepali community, Rijal said common mistakes include failing to report cash or tip income, incomplete documentation, rushing to file without proper review, and misunderstanding deduction eligibility.
He emphasized that taxpayers are allowed to legally minimize their tax liability through proper planning—but underreporting income can lead to serious consequences.
As the April filing deadline approaches, Rijal encouraged community members to file early, maintain thorough documentation, and seek professional advice when needed to avoid penalties and maximize available benefits.
Suresh Shahi
View More PostsSuresh Shahi is the editor of NepYork, the showcase of Nepalis in the USA. He has also been an editor of Khasokhas, the voice of the Nepali diaspora in the USA, since 2012. Currently, he hosts the podcast ‘Community Cornerstone.’ Previously, he served as a host, anchor, and news reporter for ABC TV Nepal.
