OBBBA deductions explained for 2026

The One Big Beautiful Bill Act (OBBBA), signed in 2025, created four brand-new federal deductions and temporarily raised one old limit. For tax year 2026 they’re all in full effect — and most filers have never claimed any of them. This guide explains each one in plain English and links to a free calculator so you can run your own numbers.

No tax on overtime

If you earn FLSA-required overtime, the premium portion — the extra “half” in time-and-a-half — is deductible up to $12,500 (single) or $25,000 (married filing jointly). The full amount is available below $150,000 / $300,000 MAGI, then it shrinks by $100 per $1,000 over the line. Try the overtime calculator.

No tax on tips

Workers in occupations that customarily received tips before 2025 can deduct up to $25,000 of reported tip income. The phase-out thresholds match overtime — $150,000 single / $300,000 joint — with the same $100 per $1,000 ladder. Tips still incur payroll taxes; this deduction is for income tax. Try the tips calculator.

Auto loan interest

Bought a new, US-assembled vehicle with a loan taken out after December 31, 2024? Up to $10,000 of the interest is deductible for personal-use vehicles. The income limits are tighter: the deduction drops $200 per $1,000 of MAGI over $100,000 (single) or $200,000 (joint). Try the auto loan calculator.

Senior deduction

Each person 65 or older adds a $6,000 deduction — $12,000 for a couple where both qualify. It stacks with the standard deduction and phases out at 6% of MAGI above $75,000 (single) or $150,000 (joint). Try the senior deduction calculator.

The SALT cap: $40,400 for 2026

The state and local tax deduction cap rose from $10,000 to $40,000 in 2025 and is $40,400 for 2026 — a big deal for itemizers in high-tax states. Above $505,000 MAGI the cap phases down by 30% of the excess, bottoming out at the old $10,000 floor. Try the SALT cap calculator.

How they stack

The four Schedule 1-A deductions — overtime, tips, auto loan interest, and senior — are all available whether or not you itemize, and they combine on the same return. A 66-year-old server with overtime could in principle claim three at once. Our Schedule 1-A estimator adds them up with one shared MAGI input.

One caution: all of these provisions expire after 2028 under current law, and the IRS is still issuing guidance on reporting details. Check back — every TallyMyTax page carries a “last verified” date.