Complete Guide to Lexington Tax Filing for 2026: Key Deadlines, New Deductions & IRS Updates

The 2026 tax filing season is here, and for Lexington residents, understanding the new rules and deadlines is essential. With major changes from the One Big Beautiful Bill Act taking effect, including new deductions for seniors, tips, and overtime pay, this year’s Lexington tax filing process requires careful attention. The IRS opens on January 26, 2026, with an April 15 deadline, giving you time to gather documents and maximize your 2026 refund with expert preparation.

Table of Contents

• Key Takeaways
• 2026 Tax Filing Deadlines
• Major Tax Law Changes for 2026
• What Changed for 2026 Filers?
• Lexington & Kentucky Specific Filing Requirements
• How to Maximize Your 2026 Refund
• Uncle Kam in Action
• Next Steps
• Frequently Asked Questions

Key Takeaways

• Filing Opens January 26, 2026: The IRS begins accepting 2025 tax returns immediately. File early to avoid delays and receive refunds by mid-March.
• April 15 Deadline: All individual federal returns must be filed or extended by April 15, 2026. Lexington residents follow the same federal deadline.
• New $6,000 Senior Deduction: Americans 65+ with Social Security income can claim a new federal deduction through 2028.
• Tips & Overtime Deductions Available: Workers can deduct up to $25,000 in tips and $12,500-$25,000 in overtime pay (depending on filing status).
• E-Filing Strongly Recommended: Electronic filing processes within 21 days. Paper returns take 6+ weeks, and IRS staffing is reduced this year.

What Are the Critical 2026 Tax Filing Deadlines?

Understanding Lexington tax filing deadlines is crucial for avoiding penalties and delays. The 2026 filing season begins on January 26, 2026, marking the official start when the IRS opens its systems to accept individual income tax returns for the 2025 tax year. This date is one day earlier than last year, giving Lexington taxpayers a slight head start on preparation.

The primary filing deadline remains April 15, 2026, for all federal individual income tax returns. This is the absolute final date to either file your return or request an automatic six-month extension using IRS Form 4868. However, requesting an extension only extends your filing deadline to October 15, 2026—not your payment deadline. Any taxes owed must still be paid by April 15 to avoid penalties and interest charges.

Key 2026 Tax Filing Dates for Lexington Residents

Date	Event	What You Need to Know
January 26, 2026	IRS Opens Filing Season	You can begin filing your 2025 returns electronically. Start now if you expect a refund.
February 2, 2026	W-2 & 1099 Deadline	Employers must provide W-2s, W-2Gs, and most 1099 forms (1099-NEC, 1099-INT, 1099-DIV). Gather these before filing.
March 3, 2026	Early EITC/CTC Refunds	Earliest possible refund date for filers claiming EITC or CTC with direct deposit. Others receive refunds within 21 days of e-filing.
April 15, 2026	Federal Filing Deadline	Final day to file your 2025 return OR request an automatic extension (Form 4868). Any taxes owed are still due today.
October 15, 2026	Extension Deadline	If you received an extension, this is your final filing deadline. Payment must have been made by April 15.

What Major Tax Law Changes Affect 2026 Lexington Tax Filing?

The most significant changes affecting 2026 Lexington tax filing come from the One Big Beautiful Bill Act, signed into law in mid-2025. Because withholding tables were not updated when these changes took effect, many taxpayers will receive larger refunds than in prior years—potentially an average of $1,000 or more per household. Understanding these changes is essential for maximizing your 2026 refund.

2026 Standard Deduction Increases

The standard deduction—the amount you can deduct before itemizing—has increased significantly for 2026 filers. These amounts are used for the 2025 tax year filed in 2026.

• Single Filers: $15,750 (increased by $750)
• Married Filing Jointly: $31,500 (increased by $1,500)
• Head of Household: $23,625 (increased by $750)
• Additional for Age 65+: $2,000 (single/HOH) or $1,600 (MFJ)

New Senior Deduction: $6,000 Additional Deduction

For Lexington residents age 65 and older, a new $6,000 federal deduction is now available for those with Social Security income. This deduction is available through the 2028 tax year. Single filers can deduct $6,000, while married couples filing jointly can deduct up to $12,000. This is on top of the standard deduction and any additional deduction for age 65+.

To claim this deduction, you must have had Social Security or Tier 1 Railroad Retirement income. If you’re a senior Lexington taxpayer, consult with a tax professional to ensure you’re claiming this benefit correctly on your 2026 return.

Tax Deductions for Tips and Overtime Pay

For Lexington workers earning tips or overtime pay, new deductions can significantly reduce your taxable income. These deductions are particularly beneficial for hospitality, service, and gig economy workers.

• Tips Deduction: Up to $25,000 per year for qualified tip income
• Overtime Pay Deduction (Single): Up to $12,500 per year
• Overtime Pay Deduction (Married Filing Jointly): Up to $25,000 per year
• Phase-Out Range: Benefits reduce for single filers over $100,000 AGI and joint filers over $200,000 AGI

What Else Changed for 2026 Tax Filers?

Auto Loan Interest Deduction

New for 2026, Lexington residents can now deduct up to $10,000 in interest paid on qualifying auto loans for vehicles assembled in the United States. This deduction applies to single filers with income under $100,000 and joint filers under $200,000. The benefit is available whether you itemize or take the standard deduction.

Expanded SALT Deduction

The state and local tax (SALT) deduction has increased from $10,000 to $40,000 for 2026 (through 2029) for taxpayers with income under $500,000. This is particularly beneficial for Lexington residents in Kentucky with significant property taxes, state income taxes, or local taxes. The increased SALT deduction may make itemizing deductions more advantageous than claiming the standard deduction for some filers.

Child Tax Credit Increase

Families with qualifying children can now claim a $2,200 tax credit per child (increased from $2,000). This credit is available whether you take the standard deduction or itemize deductions.

What Are Lexington & Kentucky Specific Filing Requirements?

As a Lexington resident, you must navigate both federal and Kentucky state income tax requirements. Kentucky requires state income tax filing from most residents, and Lexington’s location in Fayette County may include additional local tax considerations. Understanding these layered requirements is essential for proper Lexington tax filing.

Kentucky State Income Tax Requirements

Kentucky taxes individual income, including wages, self-employment income, interest, dividends, and retirement distributions. The state has a progressive tax rate structure, and most Lexington residents are required to file a Kentucky return by the same April 15, 2026 deadline as the federal return. Working with professional Lexington tax preparation services ensures compliance with both federal and state requirements.

Fayette County Property Tax Considerations

Lexington residents in Fayette County may have property tax assessments that affect tax planning. Kentucky property taxes are relatively low, but assessments can impact your overall tax liability. If you own real estate in Lexington, consider the property tax impact when planning your overall tax strategy.

How Can You Maximize Your 2026 Refund?

Five-Step Strategy for Maximum 2026 Refunds

• Step 1 – File Early & Electronically: File your return within the first two weeks of January 26 to receive refunds by mid-March. E-filing processes within 21 days versus 6+ weeks for paper returns. Budget cuts at the IRS mean longer processing times for paper returns in 2026.
• Step 2 – Claim All New Deductions: Review the new tips, overtime, auto loan interest, and senior deductions. Gather documentation including pay stubs, loan statements, and Social Security forms to support these claims.
• Step 3 – Evaluate Itemizing vs. Standard Deduction: With the higher SALT deduction ($40,000), itemizing may now benefit more Lexington taxpayers. Calculate both scenarios to determine which approach yields larger deductions.
• Step 4 – Verify Your Information: Double-check all income amounts, Social Security numbers, dependent information, and bank details for direct deposit. Errors are a leading cause of IRS processing delays and flagged returns.
• Step 5 – Use Direct Deposit: Direct deposit refunds process faster than checks. Provide accurate bank information to avoid delays. IRS expects to process most e-filed refunds within 21 days.

 

Uncle Kam in Action: How Sarah Maximized Her 2026 Lexington Tax Filing

Client Snapshot: Sarah is a 52-year-old professional in Lexington who works as an administrative manager at a local healthcare facility. She earns a salary of $75,000 annually and receives modest income from a rental property she inherited in Fayette County.

Financial Profile: Annual W-2 income of $75,000, rental property income of approximately $12,000 annually, and modest investment income of $800 in dividends. She had been taking the standard deduction for the past decade, never itemizing.

The Challenge: Sarah wasn’t aware of the expanded SALT deduction that had increased to $40,000 for 2026. She also hadn’t considered that with her new property tax obligations in Fayette County and Kentucky state income taxes, she might now benefit from itemizing deductions instead of taking the standard deduction. Additionally, Sarah’s employer’s payroll system hadn’t been fully updated to account for all the new deductions available under the One Big Beautiful Bill Act.

The Uncle Kam Solution: Uncle Kam’s tax strategy team conducted a comprehensive analysis of Sarah’s 2026 Lexington tax filing situation. They calculated that her itemized deductions—including the expanded $40,000 SALT deduction, property taxes on her rental property, and mortgage interest—totaled $42,500, compared to the $15,750 standard deduction for a single filer. By itemizing, Sarah reduced her taxable income by an additional $26,750. Additionally, the team ensured she claimed all credits she qualified for and properly documented her rental property deductions.

The Results: By strategically itemizing and claiming available deductions, Sarah received a 2026 refund of $8,400, compared to an expected $2,100 refund using the standard deduction. This represents a 4x return on her $2,000 investment in professional tax preparation—meaning she saved an additional $6,300 through strategic planning. This strategy also positions Sarah for better tax efficiency in future years with her rental property income. This is just one example of how our proven tax strategies have helped clients maximize refunds while minimizing long-term tax liability.

Next Steps for Your 2026 Lexington Tax Filing

Now that you understand the key changes affecting Lexington tax filing for 2026, take action immediately:

• Gather Your Documents: Collect all W-2s, 1099 forms, property tax statements, and documentation of tips, overtime, or other new deductions by early February when employers provide forms.
• Review New Deductions: Determine if you qualify for the senior deduction ($6,000), tips deduction ($25,000), overtime deduction ($12,500-$25,000), or auto loan interest deduction ($10,000).
• Calculate Itemization Benefit: Use the $40,000 SALT deduction to determine if itemizing deductions exceeds your standard deduction amount for better overall tax savings.
• File Early & Electronically: Submit your return electronically within the first two weeks of filing season (by February 9, 2026) to receive your refund by mid-March and avoid processing delays.
• Consult a Tax Professional: Connect with Lexington tax preparation specialists who understand both federal and Kentucky requirements to ensure maximum refunds and compliance.

Frequently Asked Questions About 2026 Lexington Tax Filing

When Should I File My 2026 Lexington Tax Return?

You should file your 2026 Lexington tax return as early as possible after January 26, 2026. If you’re expecting a refund, filing immediately gives the IRS time to process your return and issue your refund by mid-March. Due to IRS budget cuts and staffing reductions in 2026, early filing is more important than ever to avoid processing backlogs. The April 15 deadline applies to all Lexington residents, but filing early ensures your refund arrives faster and reduces your risk of errors or processing delays.

Do I Need to File Both Federal and Kentucky Returns?

Yes, as a Lexington resident, you must file both a federal income tax return and a Kentucky state income tax return if your income exceeds Kentucky’s filing threshold. The deadlines are the same (April 15, 2026), and most tax preparation software allows you to file both simultaneously. Kentucky taxes W-2 wages, self-employment income, interest, dividends, and retirement distributions, so most working Lexington residents are required to file state returns.

How Can I Claim the New $6,000 Senior Deduction?

The new $6,000 senior deduction is available to taxpayers age 65 and older who have Social Security or Tier 1 Railroad Retirement income. You claim this deduction directly on your tax return using Schedule 1-A when filing your 2025 return in 2026. Single filers can deduct $6,000, while married couples filing jointly can deduct up to $12,000. This deduction is separate from and in addition to the standard deduction and any additional deduction for being 65+.

What Documentation Do I Need for Tips and Overtime Deductions?

For tips and overtime deductions, the IRS waived employer reporting requirements, meaning you must document these amounts yourself. Keep detailed records including pay stubs showing tips and overtime pay, W-2 forms, 1099 forms (if applicable), and personal records of unreported cash tips. The IRS may ask for this documentation if your return is audited, so maintain thorough records for at least three years. When filing your 2026 Lexington return, you’ll claim these deductions on Schedule 1-A.

Will IRS Processing Be Slower in 2026 Due to Budget Cuts?

Yes, tax experts are warning of potential delays in 2026. The IRS workforce has been reduced by 26% due to recent layoffs, and the 2026 budget is $11.2 billion—9% lower than 2025’s $12.3 billion budget. While the IRS still targets 21-day processing for e-filed returns, returns with errors or new deductions (like tips and overtime) may be flagged for additional review, extending processing times to 6-8 weeks or longer. This is why accurate, early filing is critical. File electronically, double-check all information, and maintain documentation of any new deductions you claim.

Should I Itemize Deductions or Take the Standard Deduction in 2026?

Calculate both scenarios for your specific situation. The standard deduction for single filers is $15,750 in 2026. If your itemized deductions (including property taxes, mortgage interest, charitable donations, and the new $40,000 SALT deduction) exceed your standard deduction, itemizing saves you money. With the expanded SALT deduction, more Lexington residents may now benefit from itemizing, especially those with significant property taxes or charitable donations. Use tax software or consult a professional to compare both options.

How Long Will It Take to Receive My 2026 Refund?

The IRS typically processes e-filed returns within 21 days. However, if you claim the Earned Income Tax Credit (EITC) or Child Tax Credit (CTC), your refund may be delayed until March 3, 2026, for fraud-prevention purposes. Paper-filed returns take 6 weeks or longer. Direct deposit refunds arrive faster than paper checks. If your return is flagged for errors or additional review, processing may take 6-8 weeks or longer. File early, verify all information, and use direct deposit to receive your refund as quickly as possible.

 

This information is current as of 01/27/2026. Tax laws change frequently. Verify updates with the IRS (IRS.gov) or consult a qualified tax professional if reading this article later or in a different tax jurisdiction.

Last updated: January, 2026