Every 2026 Tax Change Explained Simply
The One Big Beautiful Bill Act changed more about your taxes than any law since the 2017 Tax Cuts and Jobs Act. This page covers every change that affects individual taxpayers in 2026, with a free calculator for each one.
The four new deductions (Schedule 1-A)
For the first time, you can claim these deductions on top of the standard deduction without itemizing. They all go on a new IRS form called Schedule 1-A.
No tax on tips - up to $25,000
Tipped workers can deduct up to $25,000 of qualifying tip income from federal taxes. Servers, bartenders, delivery drivers, salon workers, and about 70 other occupations qualify. The deduction phases out above $150,000 for singles and $300,000 for married couples. Gig workers on DoorDash and Uber qualify too but the deduction is capped at net Schedule C profit. Calculate your tips deduction.
No tax on overtime - up to $12,500
Hourly workers can deduct the premium half of time-and-a-half pay. If your regular rate is $30 and your overtime rate is $45, the $15 premium is deductible. The cap is $12,500 for singles and $25,000 for married filing jointly. Only FLSA-required overtime counts. Full breakdown of who qualifies. Calculate your overtime deduction. Or use the basic overtime pay calculator to see your time-and-a-half rate.
Car loan interest - up to $10,000
You can deduct up to $10,000 of interest on a loan for a new car assembled in the United States. The car must be new (not used or leased), bought after December 2024, and assembled at a US plant. Paste your VIN to check instantly. See which cars qualify and why leases and used cars do not. Your lender reports the interest on Form 1098-VLI.
Senior deduction - $6,000 per person age 65+
Everyone age 65 or older gets an extra $6,000 deduction. Married couples where both are 65+ get $12,000. It phases out above $75,000 single and $150,000 married. Combined with the standard deduction, a single senior can shield $24,150 of income from federal tax. Calculate your senior deduction. See also: is Social Security tax free now?
These are below-the-line deductions
All four Schedule 1-A deductions reduce your taxable income but not your AGI. That means they do not help with phase-outs for the child tax credit, IRA contributions, or other AGI-based limits. Read above vs below the line deductions explained.
Updated standard deduction
The standard deduction for 2026 is $16,100 for single filers, $32,200 for married filing jointly, and $24,150 for head of household. These are adjusted for inflation from 2025. The Schedule 1-A deductions stack on top of these amounts.
Updated tax brackets
The seven federal tax rates (10% through 37%) did not change but the income thresholds moved up for inflation. See the full 2026 tax brackets by filing status. The bracket thresholds determine how much each deduction saves you.
SALT cap increase
The state and local tax deduction cap rose from $10,000 to $40,400 for 2026 (up 1% from $40,000 in 2025). It phases down for incomes above $500,000. This only matters if you itemize. Calculate your SALT deduction.
Child tax credit increase
The child tax credit increased from $2,000 to $2,200 per qualifying child under 17. Up to $1,700 is refundable. Phase-out starts at $200,000 single and $400,000 married. Calculate your child tax credit.
Trump Accounts
A new tax-advantaged investment account for children. The government deposits $1,000 for kids born 2025 through 2028. Parents can add up to $5,000 per year. Grows tax deferred in US stock index funds until age 18 when it converts to a traditional IRA. Children under 10 in qualifying ZIP codes may also get a $250 Dell Foundation deposit. See how it grows with the calculator. Read the Trump Account vs 529 comparison.
Charitable deduction for non-itemizers
New for 2026: deduct up to $1,000 of cash charitable donations without itemizing ($2,000 married). This is above the line and actually reduces your AGI, unlike the Schedule 1-A deductions. Full details.
Student loan changes
The One Big Beautiful Bill also overhauled federal student loan repayment. The Repayment Assistance Plan (RAP) replaced SAVE as the primary income-driven plan. SAVE is gone. PAYE ends in 2028. Borrowers who consolidate after July 1, 2026 permanently lose access to IBR and are locked into RAP or the Tiered Standard Plan.
Key tools: RAP vs IBR comparison. IBR calculator. PSLF forgiveness estimator. PSLF buyback guide. Married filing separately and RAP.
Filing status matters more than ever
Married filing separately now kills the tips and overtime deductions entirely. Neither spouse can claim either one. That makes the filing status decision critical for couples where one or both earn tips or overtime. It also affects student loan payments under RAP.
State conformity
The federal deductions do not automatically apply at the state level. Most states have not passed conformity legislation. If you live in California, New York, or most other states, you still pay state tax on your tips and overtime even though the federal deduction applies. Check your state. Full conformity map.
Frequently asked questions
What are the new tax deductions for 2026?
Four new deductions on Schedule 1-A: tips (up to $25,000), overtime premium (up to $12,500), car loan interest (up to $10,000), and the senior deduction ($6,000 per person 65+). All stack on top of the standard deduction.
What is the One Big Beautiful Bill?
The tax and spending law signed in 2025 that created the four new deductions, increased the child tax credit to $2,200, raised the SALT cap to $40,000+, created Trump Accounts, and overhauled student loan repayment plans.
Do the new deductions lower my AGI?
No. The tips, overtime, car loan, and senior deductions are below the line. They reduce taxable income but not AGI. The new charitable deduction for non-itemizers is the only new above-the-line deduction. Read the full explanation.
When do the new deductions expire?
Tips, overtime, car loan interest, and the senior deduction expire after tax year 2028. The SALT cap increase expires after 2029. Trump Accounts are permanent.