Do I need to itemize my deductions to claim these?

No, for four of the six: the tips deduction, the overtime deduction, the senior bonus deduction, and the car loan interest deduction all work whether you take the standard deduction or itemize. The higher SALT cap is the exception — that one only helps if you itemize.

How do I know if my tipped job actually qualifies?

The IRS published a specific list of more than 70 qualifying occupations, grouped into categories like food and beverage, personal services, and transportation. Not every job that receives occasional tips is on it — worth confirming rather than assuming.

Will these deductions still be around in a few years?

Most of them are temporary. The tips, overtime, senior bonus, and car loan interest deductions currently run through 2028. The higher SALT cap runs through 2029. None of this is guaranteed to continue past those windows without new legislation.

Does any of this change how much tax comes out of my paycheck?

Not automatically. None of these deductions are built into standard payroll withholding tables, which means you could be over-withheld all year without realizing it. Worth checking your W-4 or estimated payments now rather than waiting to find out at filing time.

Tax Law Updates

6 New Tax Deductions in 2026 (And Why Most People Haven't Adjusted for Them Yet)

James Sieng, EAJuly 13, 20263 min read

In 2025, Congress passed the One Big Beautiful Bill Act (OBBBA), which added six new tax breaks that apply to most working people, families, and seniors — not just business owners. Most of them are already in effect for your 2025 and 2026 returns. And almost nobody has adjusted anything for them yet, because none of them show up automatically in a paycheck. They only show up if you (or whoever prepares your return) actually claims them.

Here's what changed, in plain English.

1. Tips — deduct up to $25,000

If you work in a job that customarily receives tips — servers, bartenders, hairstylists, rideshare and delivery drivers, hotel staff, casino dealers, and dozens of other listed occupations — you can now deduct up to $25,000 of reported tip income per year. The deduction phases out above $150,000 in modified adjusted gross income ($300,000 for joint filers). It works whether you take the standard deduction or itemize; you don't have to choose one to get the other.

The IRS published a specific list of over 70 qualifying occupations. Not every job that occasionally gets tipped is on it — it's worth checking rather than assuming.

2. Overtime — but only the premium half

This is the one most people misread. The deduction doesn't apply to your full overtime paycheck — only the extra premium portion. If your regular rate is $30/hour and you're paid time-and-a-half ($45/hour) for overtime, the deductible amount is the extra $15/hour, not the full $45. The cap is $12,500 for single filers and $25,000 for joint filers, with the same $150,000/$300,000 phase-out as the tips deduction. Also works with the standard deduction — no itemizing required.

3. The SALT cap just quadrupled — with a catch

The old $10,000 cap on state and local tax deductions is gone. It's now $40,000 for 2025, adjusted annually through 2029, phasing back down toward the old $10,000 level for joint filers between $500,000 and $600,000 in income. For California homeowners, this is significant — state income tax plus property tax blew past the old $10,000 cap for a lot of people, and none of it counted before.

The catch: this one does require itemizing. If your total itemized deductions — including the higher SALT amount — don't exceed your standard deduction, this change doesn't actually help you. Worth running the math rather than assuming.

4. A bigger deduction if you're 65 or older

Taxpayers 65 and older get an additional $6,000 deduction ($12,000 for a married couple where both spouses qualify), on top of the regular standard or itemized deduction. It phases out above $75,000 in income ($150,000 joint) and, like the tips and overtime deductions, doesn't require itemizing.

5. Bought a car recently? Check the loan interest

If you took out a loan after December 31, 2024 on a new vehicle — final assembly in the U.S., personal use, not a lease — you can deduct up to $10,000 of loan interest per year. It phases out between $100,000–$150,000 in income for single filers, $200,000–$250,000 for joint filers. Easy to miss if your preparer doesn't specifically ask about a recent car purchase.

6. The Child Tax Credit ticked up

The Child Tax Credit increased from $2,000 to $2,200 per qualifying child. Smaller change than the others, but automatic for anyone who already claims it — nothing extra to do here.

Why this matters in July, not next April

None of these six deductions are reflected in standard payroll withholding tables. If you're a tipped worker, someone who regularly works overtime, or 65 and older, there's a real chance you're being over-withheld right now — money the IRS is holding interest-free until you file. Checking your W-4 or your estimated payments mid-year is the way to actually feel the benefit sooner instead of just seeing it as a bigger number next spring.

It's also worth remembering these are temporary. Most of these provisions run through 2028; the SALT cap increase runs through 2029. None of it is guaranteed to continue past those windows without new legislation — plan around the years you actually have, not the assumption that this is permanent.

The information provided on this site is for general informational purposes only and does not constitute tax, legal, or financial advice. Every situation is different — consult a qualified professional regarding your specific circumstances before making any financial or tax decisions.