The 2026 Tax Changes
Four new deductions, one new form, and the phase-outs that decide how much of each you actually get.
What changed
Four new deductions took effect for the 2026 filing season: qualified tips up to twenty-five thousand dollars, qualified overtime premium up to twelve and a half thousand for single filers and twenty-five thousand joint, qualifying car loan interest up to ten thousand, and a six thousand dollar bonus deduction for taxpayers aged sixty-five and over. All four are claimed on a new form, Schedule 1-A.
They stack on the standard deduction
The most misunderstood point is that these are available whether or not you itemise. They are additional, not alternative. A filer taking the standard deduction can still claim all four if they qualify, which is unusual and is why many people underestimate their refund.
Each phase-out is different
Tips and overtime begin reducing above one hundred and fifty thousand of modified adjusted gross income, at one hundred dollars per thousand. Car loan interest begins at one hundred thousand and reduces twice as fast. The senior bonus begins at seventy-five thousand and falls by six percent of the excess. A single raise can therefore wipe out one deduction while leaving another intact.
Only the overtime premium counts
If your regular rate is twenty-six dollars and time and a half pays thirty-nine, the deductible portion is the extra thirteen per hour. The base rate is ordinary wages. Only overtime required under the Fair Labor Standards Act qualifies — holiday premiums, weekend differentials and state-only overtime do not.
Car loans have four separate tests
The vehicle must be new to you, final assembly must be in the United States, the loan must have originated after the end of 2024, and it must be secured by the vehicle. A personal loan used to buy a car fails. Because interest is front-loaded, the deduction is largest in year one and shrinks every year after.
Payroll tax is unchanged, and so is the clock
Deducted tips and overtime still attract Social Security and Medicare tax, and most states tax them normally. Only federal income tax falls. All four provisions apply to tax years 2025 through 2028 unless Congress extends them, so planning that assumes permanence is planning on an assumption.
Common questions
Can I claim more than one?
Yes, they are independent. A sixty-six-year-old server working overtime with a qualifying car loan could claim all four.
Do I need to itemise?
No. All four are below-the-line deductions on Schedule 1-A, available alongside the standard deduction.