In our previous blog, we covered what changed in tax season 2026 and why it matters for collections. Now we break down the complete tax deduction list so you can predict who's getting substantial refunds.

W-2 forms hit mailboxes on February 2nd. For lenders and collections agencies, this is your signal to identify which borrowers are about to receive substantial refunds versus those who'll see minimal returns, or even owe the IRS.

Refund size depends entirely on what borrowers can claim and the 2026 tax deduction list added provisions that will put thousands of extra dollars in the pockets of service workers, overtime earners, and seniors. If your segmentation models don't account for these, you're targeting the wrong borrowers at the wrong time.

Why the tax deduction list matters for refund predictions

A borrower earning $45,000 with three children and EITC eligibility could receive an $8,000+ refund. A borrower earning $80,000 with no children might get $1,200. Income alone tells you nothing about settlement capacity.

Refund size is driven by refundable credits, particularly the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC). Standard deductions set the floor, but credits create the cash.

Standard deductions in the 2026 tax deduction list

Most filers take the standard deduction:

Additional for 65+: Enhanced senior deduction (new in 2026) adds up to ~$6,000 per eligible taxpayer on top of the standard deduction.

Segmentation insight: Older borrowers now have significantly higher deductions, potentially increasing refunds if they have high withholding.

Above-the-line deductions

The 2026 tax deduction list includes several above-the-line deductions that reduce Adjusted Gross income (AGI) even when taking the standard deduction:

• Retirement contributions (IRA, SEP, SIMPLE)
• Student loan interest (up to ~$2,500)
• HSA contributions ($4,300 individual / $8,550 family)
• Self-employment expenses (half of SE tax, health insurance, retirement)
• Educator expenses (~$300 for K-12 teachers)

Segmentation insight: Self-employed borrowers and educators have built-in AGI reducers that increase credit eligibility.

Itemized tax deductions for 2026: Who qualifies

Borrowers who itemize are typically homeowners or high earners:

• SALT: State/local taxes capped at ~$40,000 (up from old $10,000 limit)
• Mortgage interest: Primary residence and sometimes second homes
• Charitable contributions: Cash and property donations
• Medical expenses: Unreimbursed costs above 7.5% of AGI
• PMI premiums (new): Deductible again starting 2026

Segmentation insight: High-tax-state homeowners likely itemize and prioritize secured debt over unsecured collections.

New entries on the 2026 tax deduction list

The most important updates to the tax deduction list for 2026 are these four brand-new provisions from OBBB:

These deductions are critical for segmentation because they disproportionately benefit lower- and moderate-income workers who also qualify for refundable credits, creating the $6K-$10K refund profiles you want to target.

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Tax credits beyond deductions

While the tax deduction list reduces taxable income, credits reduce tax owed dollar-for-dollar. Refundable credits are paid out even if you owe $0 in taxes. These are what create $5K-$10K refunds.

Refundable / Partially refundable credits (High priority for segmentation)

Earned Income Tax Credit (EITC)

• Max: $8,200+ for families with multiple children
• Fully refundable: The biggest refund generator for lower-income borrowers
• Signal: Married with children + income $30K-$60K = $6K-$8K refund potential

Additional Child Tax Credit (ACTC)

• Refundable portion of the $2,000 Child Tax Credit
• Up to ~$1,700 refundable per child
• Signal: Families stack ACTC on top of EITC for higher total refunds

Premium Tax Credit (PTC)

• Refundable marketplace health insurance subsidy
• Risk: If enhanced ACA credits expire, borrowers lose subsidies and face expense pressure

American Opportunity Tax Credit (AOTC)

• $2,500 per student, up to $1,000 refundable
• Signal: Families with college students get modest refund boost

Nonrefundable credits (Reduce tax, don't create refunds)

• Child Tax Credit (CTC): ~$2,000 per child
• Child and Dependent Care Credit
• Lifetime Learning Credit (LLC): Up to $2,000
• Saver's Credit
• Residential Clean Energy Credit: 30% of home improvements
• Clean Vehicle Credit: Up to $7,500 for EVs

Signal: Homeowners with clean energy/EV purchases may have large credits reducing tax owed, creating refunds if withholding was high.

How to build refund-likelihood scores

Combining entries from the tax deduction list with credit eligibility gives you predictive segmentation:

Applying the tax deduction list (Examples)

Here's how the complete tax deduction list translates to real borrower profiles:

How to use tax deduction list

W-2s arrive February 2nd. You have a narrow window before refunds land in mid-to-late February.

1. Score every account using the tax deduction list framework. Flag EITC/CTC eligibility, identify tip/overtime workers, note senior status.

2. Segment into tiers and pre-configure campaign timing and offers.

3. Update scripts to reference refunds naturally.

4. Monitor IRS schedules. EITC/ACTC refunds delayed until mid-February by law.

What's next

In this series, we're guiding you through tax season 2026. You now have the complete tax deduction list and understand how to predict refund size before borrowers file.

In the next blog, we break down when refunds actually land in bank accounts week by week, and how to time campaigns to IRS disbursement schedules.

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