The 4 New OBBBA Tax Deductions for 2026: Tips, Overtime, Car Loans & Seniors

1. No tax on tips — up to $25,000

Tipped workers in qualifying occupations can deduct up to $25,000 per year of reported tip income. The deduction begins phasing out above $150,000 of MAGI ($300,000 joint). Your employer reports tips in W-2 Box 12 — and note that Social Security and Medicare taxes still apply to tip income; only federal income tax is reduced.

2. No tax on overtime — up to $12,500 ($25,000 joint)

You can deduct the premium half of overtime pay required by the Fair Labor Standards Act — the extra 50% above your regular rate, not your full overtime wages. Cap: $12,500 single / $25,000 joint, phasing out above $150,000 MAGI ($300,000 joint). Employers must now break out qualified overtime on W-2s.

3. Car loan interest deduction — up to $10,000

Deduct up to $10,000 per year of interest on a loan for a new, US-assembled vehicle bought for personal use after 2024 (under 14,000 lbs). Phaseout starts at $100,000 MAGI ($200,000 joint). You'll report the vehicle's VIN on your return — run yours through our free VIN checker to see if your car passes all four rules, or estimate your savings with the deduction calculator. Full rules are in our complete guide.

4. Senior bonus deduction — $6,000 per person 65+

Taxpayers age 65 or older get an extra $6,000 deduction per person — on top of the standard deduction — so a qualifying couple can add up to $12,000. It phases out above $75,000 MAGI ($150,000 joint).

How to claim them: Schedule 1-A

All four deductions are claimed on the new Schedule 1-A, and you'll need a valid Social Security number. Married couples generally must file jointly to claim them.

Common questions