Tax policy and client planning are intersecting more sharply than ever this week. Retirees are watching the projected Social Security COLA for 2026, while the IRS is set to phase out paper refund checks beginning September 30. Homeowners racing to claim energy-efficiency tax credits may lose their window before year-end. Meanwhile, inflation data will test whether last week’s Fed rate cut was justified. And for service workers, new clarity emerged on how “cash tips” will be treated under the tip‑tax deduction rules.
Here are the five stories worth your close attention this week.
1. Projected 2.7% Social Security COLA for 2026
Though the Social Security Administration hasn’t formally announced the 2026 COLA, analysts expect a 2.7% increase—up from the 2.5% bump in 2025. For the average beneficiary (~$2,008/month), this means roughly a $54/month raise to $2,062.
- The increase may still lag behind inflation as measured by the CPI-W (2.9% year-over-year).
- Some analysts even forecast a 2.8% bump, which would yield an extra $56/month.
- Full details will be revealed on October 15, 2025, once the final CPI-W data is in.
Advisors should help clients run scenarios accounting for Medicare Part B premium increases, which often offset much of the COLA gain.
2. IRS to Phase Out Paper Refund Checks as of Sept. 30
In a major shift, the IRS announced it will no longer issue paper refund checks to individual taxpayers starting September 30, 2025, mandating electronic payments for refunds, Social Security, and more under Executive Order 14247.
- Most taxpayers already use direct deposit, but the change impacts those still relying on paper checks or with limited banking access.
- Taxpayers should ensure updated bank or prepaid account info on file to avoid delays.
- The IRS will issue guidance about 2025 returns and how to request waivers or alternate payment methods.
This is one of the clearest steps toward a fully digital tax infrastructure. Firms should proactively communicate this to clients and verify banking data before year-end.
Read IRS announcement / Forbes commentary
3. Last Call: Home Energy Tax Credits Expire End of 2025
Several home energy efficiency credits enacted under the Inflation Reduction Act are set to expire December 31, 2025, thanks to changes in recent tax legislation.
- Homeowners must place equipment in service before year-end to claim credits.
- The credits include 30% of costs for solar, heat pumps, insulation, and related upgrades.
- IRS rules now require qualifying items to bear a manufacturer Product Identification Number (PIN) for the credit to be allowable.
This is essentially the final year to claim meaningful federal support for clean-energy home improvements. Clients considering upgrades should aim for completion before December 31 and skilled advisors should help them navigate the PIN requirement.
4. Inflation Report Could Make or Break the Rate Cut
This week’s PCE (Personal Consumption Expenditures) price index release is being closely watched as the Fed’s preferred inflation gauge. A surprise upward print could reverse confidence in last week’s interest rate cut.
- The forecast for August PCE is ~2.8%; a hotter number could push bond yields higher.
- Bond markets have already shown volatility post–rate cut, anticipating pushback if inflation overshoots.
- If inflation holds firm, the Fed may delay further cuts or even consider re-tightening.
Advisors should prepare revised cash-flow models and hedge strategies depending on scenario outcomes.
5. “Cash Tips” in Casinos Get Clarified Under New Rule
Treasury officials clarified that casino chips given as tips will qualify under federal “No Taxes on Tips” rules. That definition now expands to cover many nontraditional tip types—mobile payments, checks, even token-based services.
- Earlier uncertainty had left casino staff and hospitality workers in limbo.
- The rules take effect for 2025 tax returns, and you don’t need to itemize to claim the deduction.
- Some services are excluded (e.g. law, healthcare, performing arts), but this clarity helps stabilize planning for tipped roles.
Advisors in hospitality-heavy regions should advise clients in casinos, hotels, and restaurants to document tip flows carefully.
Your Takeaway This Week
Retirees will be watching their COLA, but many will still feel the pinch from rising Medicare and health costs. Homeowners should scramble if they’re planning efficiency improvements—because after 2025, many of these tax credits disappear. The IRS’s shift away from paper checks is paving the way for full digital tax administration. Inflation data this week will either legitimize or challenge the Fed’s recent moves, and tip workers now have clearer guidance on how nontraditional tips are taxed.
All this means your clients face tighter timelines, higher stakes, and a greater need for nimble planning.
Harness helps tax professionals stay ahead with expert-backed insights, integrated tools, and a digital-first approach to planning.
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