The new deductions for tips and overtime
Two headline deductions arrived with 2025 and carry into 2026 at the same caps. Qualified tips: workers in customary-tipping occupations deduct up to $25,000 of reported tips from taxable income — the deduction phases down by $100 for every $1,000 of modified AGI above $150,000 single / $300,000 joint, and disappears entirely above roughly $400,000. Qualified overtime: the pay for hours beyond 40/week (the FLSA "time-and-a-half" premium portion) is deductible up to $12,500 single / $25,000 joint, same phase-out band. Both are available whether you take the standard deduction or itemize — they are "above the line" — and both expire after 2028 unless Congress extends them. Practical note: your employer reports these amounts on your 2026 W-2 in new boxes; keep your own tally if you switch jobs mid-year, because the boxes are only as good as each employer’s tracking.
The senior deduction: an extra $6,000 per person 65+
Taxpayers 65 and older get a new deduction of up to $6,000 per person ($12,000 for a joint couple where both qualify), phasing out at 6% of MAGI above $75,000 single / $150,000 joint — gone above $175,000 / $250,000. It stacks with the existing additional standard deduction for seniors ($2,050 unmarried / $1,650 married for 2026), and it is the provision most likely to change a retiree’s filing math: a married couple, both over 65, with $140,000 of retirement income now subtracts $24,000 of senior deduction plus $32,200 standard plus $3,300 of age additions before a bracket applies. For 2026 planning, the senior deduction is scheduled to run through 2028. No action is required beyond checking the box on your return — but if your income sits in the phase-out band, run the income tax calculator with and without it to see the real value in your situation.
Car loan interest becomes deductible (with fine print)
For 2026 through 2028, interest on loans taken out after December 31, 2024 for personally-owned passenger vehicles is deductible up to $10,000 per return — the first time in decades car interest has been deductible for non-business buyers. The fine print that does the work: the vehicle must be assembled in the United States (VIN starting with 1, 4 or 5), the loan must be a genuine first-lien auto loan (leases and cash purchases get nothing), and the deduction phases out above $100,000 MAGI single / $200,000 joint. On a 6.5% $45,000 loan, first-year interest runs about $2,800 — a $2,800 deduction, worth $616 to a 22%-bracket filer. Not life-changing, but free, and it applies on top of the standard deduction.
SALT cap: $40,000 and moving
The state-and-local-tax deduction cap — $10,000 since 2017 — jumps to $40,000 for 2026, steps up 1% per year through 2029, then snaps back to $10,000 in 2030. High-income fine print: the cap phases down for MAGI above $500,000, at a rate that floors at $10,000 once income hits $600,000 — so the $40,000 cap belongs to households earning roughly $100,000 to $500,000, which is most of the dual-income professional class in high-tax states. The practical consequence is that itemizing comes back: a California couple paying $28,000 of state income tax and $12,000 of property tax now captures the full $40,000 against the $32,200 standard deduction — a $7,800 swing. Run both scenarios in the income tax calculator’s itemized mode before defaulting to standard.
Child Tax Credit up to $2,200, and charity for non-itemizers
Two family-and-giving changes complete the picture. The Child Tax Credit rises to $2,200 per qualifying child under 17 (the refundable portion up to $1,700), still phasing out above $200,000 single / $400,000 joint at $50 per $1,000 of excess. And starting in 2026, non-itemizers can deduct cash charitable gifts — up to $1,000 single / $2,000 joint, an above-the-line "universal charitable deduction" that existed pre-2017 and returns now. Meanwhile the itemizers’ side tightened: new gifts face a 0.5%-of-AGI floor (the first half-percent of income given yields no deduction), which nudges generous givers toward bunching two years of gifts into one. Together with the tips/overtime/senior deductions, the 2026 theme is unmistakable: more deductions delivered before the bracket table applies — which is exactly why running your real numbers through a calculator beats reading a bracket table cold.
Estimates for planning only — not tax, legal or accounting advice. Your actual return depends on facts this tool does not ask about. Figures are based on IRS Revenue Procedure 2025-32 (tax year 2026), verified October 2026.