Every New Tax Deduction in 2026 You Need to Know
All 2026 tax deductions from the One Big Beautiful Bill Act. SALT cap $40,000, no tax on tips, car loan interest deduction, senior bonus, and 401k super catch-up.
The One Big Beautiful Bill Act, signed into law on July 4, 2025, is the biggest tax overhaul since the 2017 Tax Cuts and Jobs Act. It makes the TCJA’s individual tax cuts permanent and adds brand-new deductions for tips, overtime, car loans, and seniors.[1]
Whether you earn tips, drive to work, or just turned 65, there is likely something new for you. Here is every deduction that changed for 2026 and what it means for your wallet.
Helpful Calculators for This Guide
Standard Deduction Goes Up Again
The standard deduction keeps climbing with inflation. For tax year 2026, the IRS set these amounts.[2]
| Filing Status | 2025 Amount | 2026 Amount | Increase |
|---|---|---|---|
| Single | $15,000 | $16,100 | $1,100 |
| Married Filing Jointly | $30,000 | $32,200 | $2,200 |
| Head of Household | $22,500 | $24,150 | $1,650 |
These are the amounts you subtract from your income before calculating what you owe. A higher standard deduction means less taxable income and a smaller tax bill, even if nothing else about your situation changed. Those inflation adjustments matter even more now that 2026 tariffs are raising prices on everything from groceries to electronics.
Seniors 65 and older still get the regular additional standard deduction on top of these numbers. That is $2,050 for single filers and $1,650 per spouse for joint filers.
Recommended read: Tax-Free Wealth: How to Build Massive Wealth by Permanently Lowering Your Taxes by Tom Wheelwright. A Rich Dad Advisor breaks down how the tax code rewards certain behaviors and how to use every legal deduction to keep more of what you earn.
SALT Cap Rises to $40,000
The state and local tax deduction was capped at $10,000 under the 2017 tax law. That cap hit taxpayers in high-tax states like New York, New Jersey, and California especially hard.[3]
Starting in 2025, the SALT cap jumps to $40,000. For 2026, it adjusts to $40,400 after a 1% annual inflation bump.[4]
Key details on the new SALT rules:
- Income limit: The $40,000 cap applies to filers with adjusted gross income under $500,000 for joint returns and $250,000 for married filing separately
- Phasedown: Above those income thresholds, the cap phases down at a rate of 30 cents per dollar of excess income
- Annual increases: The cap rises by 1% each year through 2029
- Married filing separately: The cap is $20,000 per spouse
SALT Deduction Cap by Year
If you pay more than $10,000 in state income taxes and property taxes combined, this change could save you thousands. A homeowner in New Jersey paying $15,000 in property taxes and $8,000 in state income tax can now deduct the full $23,000 instead of just $10,000. If a bigger SALT deduction frees up cash and you’re considering refinancing your mortgage in 2026, the math just got a lot more favorable.
No Tax on Tips, Up to $25,000
Tipped workers get a new qualified tips deduction of up to $25,000 per year. This is an above-the-line deduction, meaning it reduces your adjusted gross income directly.[5]
Here is who qualifies:
- Occupation: You must work in a job where tipping is customary, such as servers, bartenders, hairstylists, rideshare drivers, and delivery workers
- Reporting: Tips must be properly reported to your employer
- Income phaseout: The deduction starts phasing out at $150,000 for single filers and $300,000 for joint filers
- Expiration: This deduction runs from 2025 through 2028
A server earning $50,000 per year with $20,000 in tips would effectively pay no federal income tax on those tips. At a 22% marginal rate, that is roughly $4,400 in annual savings.
Overtime Pay Deduction
The new overtime deduction lets workers exclude up to $12,500 in qualified overtime pay from federal income tax. Joint filers can deduct up to $25,000.[5]
Important limits apply:
- FLSA requirement: Only overtime pay required under the Fair Labor Standards Act qualifies. Extra pay from state laws, union contracts, or employer bonus programs does not count.
- Hourly workers only: Salaried exempt employees do not qualify
- Income phaseout: Phases out at a rate of $100 per $1,000 of income above $150,000 for single filers and $300,000 for joint filers
- Expiration: Available for tax years 2025 through 2028
A factory worker earning $55,000 with $8,000 in FLSA overtime could save roughly $1,760 at the 22% bracket.
Recommended read: The Book on Tax Strategies for the Savvy Real Estate Investor by Amanda Han and Matthew MacFarland. A practical guide to deductions and write-offs that applies well beyond real estate, especially useful for understanding how new tax provisions interact with existing rules.
Car Loan Interest Deduction
You can now deduct up to $10,000 per year in interest paid on a loan for a qualified passenger vehicle.[6]
This is one of the more specific deductions in the new law. Here are the rules:
- New vehicles only: Used cars do not qualify
- Made in America: The vehicle must undergo final assembly in the United States
- Vehicle types: Cars, minivans, vans, SUVs, pickup trucks, and motorcycles under 14,000 pounds gross weight
- Income phaseout: Phases out for single filers above $100,000 and joint filers above $200,000 in modified adjusted gross income
- Duration: Available for vehicles purchased from 2025 through 2028
| Loan Amount | Interest Rate | Annual Interest | Deduction | Tax Savings at 22% |
|---|---|---|---|---|
| $30,000 | 6.5% | $1,950 | $1,950 | $429 |
| $45,000 | 7.0% | $3,150 | $3,150 | $693 |
| $60,000 | 7.5% | $4,500 | $4,500 | $990 |
| $80,000 | 8.0% | $6,400 | $6,400 | $1,408 |
Car Loan Interest Tax Savings at 22% Bracket
Helpful Calculators for This Guide
Senior Bonus Deduction, $6,000 Extra
Taxpayers age 65 and older get a brand-new senior deduction of $6,000 per eligible person. A married couple where both spouses are 65 or older can deduct $12,000.[7]
This is separate from the existing additional standard deduction for seniors. Here is how they stack up together for a single filer age 65 or older:
- Standard deduction: $16,100
- Additional standard deduction for age 65+: $2,050
- New senior bonus deduction: $6,000
- Total: $24,150
That is a significant reduction in taxable income. For a married couple both over 65 filing jointly, the combined deductions reach $45,700.
Important details:
- Income phaseout: Begins at $75,000 for single filers and $150,000 for joint filers
- Duration: Available for tax years 2025 through 2028
- Stacks with other deductions: This adds to the existing additional standard deduction, not replacing it
Total Deductions for Single Filer Age 65+
401k Super Catch-Up Contributions
The SECURE 2.0 Act introduced a super catch-up provision for retirement savers ages 60 through 63. For 2026, here are the contribution limits.[8]
| Age Group | Base Limit | Catch-Up | Total Limit |
|---|---|---|---|
| Under 50 | $24,500 | $0 | $24,500 |
| 50-59 | $24,500 | $8,000 | $32,500 |
| 60-63 | $24,500 | $11,250 | $35,750 |
| 64+ | $24,500 | $8,000 | $32,500 |
The super catch-up at ages 60 to 63 lets you stash an extra $3,250 compared to the regular catch-up. If you max it out for all four years, that is an additional $13,000 in tax-advantaged retirement savings.
This applies to 401k, 403b, governmental 457 plans, and the federal Thrift Savings Plan.
Estate Tax Exemption Hits $15 Million
The estate and gift tax exemption jumps to $15 million per individual for 2026, up from $13.99 million in 2025.[9]
- Per couple: $30 million combined using portability
- Permanent: The One Big Beautiful Bill made this higher exemption permanent, though it will continue adjusting for inflation
- Gift tax: The annual gift tax exclusion for 2026 is $19,000 per recipient
Under the original TCJA, the exemption was set to drop back to roughly $7 million per person in 2026. The new law prevents that sunset entirely.
All New Deductions at a Glance
Here is a summary of every major new or changed deduction for 2026.
| Deduction | Maximum Amount | Income Phaseout Starts | Expires |
|---|---|---|---|
| SALT cap increase | $40,400 | $500,000 joint | Permanent |
| Qualified tips | $25,000 | $150,000 single | 2028 |
| Qualified overtime | $12,500 single | $150,000 single | 2028 |
| Car loan interest | $10,000 | $100,000 single | 2028 |
| Senior bonus | $6,000 per person | $75,000 single | 2028 |
| Estate exemption | $15,000,000 | N/A | Permanent |
| Standard deduction | $16,100 single | N/A | Permanent |
Maximum Dollar Value of Each New Deduction
Recommended read: Taxes Made Simple: Income Taxes Explained in 100 Pages or Less by Mike Piper. A concise, plain-English overview of how income taxes actually work, perfect for understanding how all these new deductions fit into the bigger picture of your tax return.
What to Do Before You File
These deductions are available now, but some require you to take action before the end of the tax year.
- Track your tips: If you are a tipped worker, make sure every dollar of tip income is properly reported to your employer. You cannot claim the deduction on unreported tips.
- Verify your vehicle: If you bought a new car in 2025 or 2026, confirm it was assembled in the United States. The IRS has a VIN lookup tool to check.
- Max out retirement: If you are between 60 and 63, take advantage of the super catch-up window. It only lasts four years.
- Review your SALT: If you have been skipping itemized deductions because the old $10,000 SALT cap made them worthless, run the numbers again. The $40,000 cap could tip the scales.
- Check your income: Most of these deductions phase out above certain income levels. Estimate your 2026 income to see which ones you qualify for.
- Put the savings to work: If these deductions lower your tax bill, consider using the extra cash to pay down high-interest debt. Our guide to the debt snowball vs avalanche methods can help you pick the fastest payoff strategy, and if credit card balances are the problem, a balance transfer in 2026 could save you even more in interest.
Helpful Calculators for This Guide
Sources
Standard Deduction Goes Up Again
Overview
1. One, Big, Beautiful Bill provisions (IRS, 2025)
SALT Cap Rises to $40,000
3. SALT Deduction Changes in the One Big Beautiful Bill Act (Bipartisan Policy Center, 2025)
4. One Big Beautiful Bill: SALT deduction and other changes for homeowners (H&R Block, 2025)
No Tax on Tips and Overtime Pay Deduction
5. One, Big, Beautiful Bill Act: Tax deductions for working Americans and seniors (IRS, 2025)
Car Loan Interest Deduction
Senior Bonus Deduction
7. 7 Big Tax Changes for 2026 (AARP, 2026)
401k Super Catch-Up Contributions
8. 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500 (IRS, 2025)
Estate Tax Exemption Hits $15 Million
9. IRS Announces Increased Gift and Estate Tax Exemption Amounts for 2026 (Morgan Lewis, 2025)
Related Articles
How 2026 Tariffs Are Raising Prices on Everything
See exactly how 2026 tariffs are hitting your wallet. From groceries to electronics, learn the real cost per household and how to protect your budget.
Balance Transfer Guide 2026, Save on Credit Card Debt
Learn how balance transfers work in 2026. Compare 0% APR promo periods up to 21 months, transfer fees, and calculate your exact savings before you apply.
First-Time Homebuyer Guide 2026, What You Actually Need to Know
Everything first-time homebuyers need to know in 2026. Down payment myths, FHA vs conventional loans, closing costs, PMI, and how much house you can actually afford.
FIRE Movement in 2026, What Changed and How to Plan
The FIRE movement looks different in 2026. Learn updated FIRE numbers and strategies.
How to Pay Off Any Loan Faster and Save Thousands
Learn proven strategies to pay off your mortgage, auto loan, or personal loan faster. See how extra payments, bi-weekly schedules, and refinancing save you thousands.
Debt Snowball vs Avalanche, Which Method Saves More
Compare the debt snowball and avalanche methods with real numbers. See which strategy saves more interest and helps you become debt-free faster in 2026.
As an Amazon Associate, Calcmatic earns from qualifying purchases.