2025 saw a major tax overhaul with the passing of the One Big Beautiful Bill Act (OBBBA). OBBBA has impacts that impact both the current and next filing season. Let’s recap what you may need to consider for the 2026 tax season when you prepare your taxes.

Increased State and Local Tax (SALT) Cap

In 2018, the SALT deduction cap was $10,000. Previously there was no limit.

Beginning for the tax year 2025, the cap increased to $40,000 for individual and married filers. It phases out at $500,000 modified adjust gross income (MAGI) ($250,000 for married filing separately) and reverts to $10,000 when MAGI exceeds $600,000. The cap increases every year and expires in 2030 reverting back to $10,000.

For the 2026 tax season, you’ll want to consider a few things that may change how you itemize.

• High state income taxes
• Primary + vacation home property taxes exceed $10,000
• Major home improvements or purchases subject to retail sales tax

“Bonus” Senior Tax Deduction

The senior tax deduction is a new deduction for the 2026 tax season. Unlike the additional standard deduction for seniors, both itemizing and non-itemizing taxpayers can qualify for this deduction.

Key points:

• The bonus deduction is $6,000 for each taxpayer 65 or older by December 31, 2025
• Phases out for individual filers with modified adjusted gross income over $75,000 ($150,000 for married) and is fully phased out at $175,000 ($250,000 for married)
  • The phaseout reduces the deduction by $60 for every $1,000 over the threshold

An example, if married taxpayers are 65+, do not itemize, and their income is less than the phaseout, their “standard deduction” would be $47,500.

No Tax on Overtime Deduction

“No tax on overtime” is a new deduction for the 2026 tax season. Qualified overtime compensation is reported on your W-2 and deducted on your tax return.

Key points:

• Qualified overtime is 1.5 times regular pay
• The maximum deduction is $12,500 per individual ($25,000 for married)
• The deduction phases out for individual filers with modified adjusted gross income over $150,000 ($300,000 for married)
• It’s an above-the-line deduction so itemizing and non-itemizing taxpayers can deduct it

For the 2026 tax season, W-2s remain unchanged. If an employer opts to report qualified overtime, it shows up in Box 14.

For guidance on reporting Qualified Tips or Overtime Compensation, see the following IRS publication.

No Tax on Tips Deduction

“No tax on tips” is a new deduction for the 2026 tax season. Qualified tips are reported on your W-2 and deducted on your tax return.

Key points:

• You receive tips in a qualifying occupation
• The maximum deduction is $25,000 per tax return
• The deduction for self-employed individuals may not exceed net income from earnings
• The deduction phases out for individual filers with modified adjusted gross income over $150,000 ($300,000 for married)
• It’s an above-the-line deduction so itemizing and non-itemizing taxpayers can deduct it

For the 2026 tax season, W-2s remain unchanged. There are multiple options for tipped employees to satisfy reporting requirements.

• Use the total amount of tips reported in box 7 of the W-2
• Use the total amount of tips reported by the employee to the employer on Form 4070
• Use the total amount of tips reported by the employer in box 14 of the W-2
• File Form 4137 with your tax return to report tips not reported to your employer

For guidance on reporting Qualified Tips or Overtime Compensation, see the following IRS publication.

Car Loan Interest Deduction

This new deduction for the 2026 tax season allows taxpayers to write off up to $10,000 annually in loan interest paid. There are a several requirements and limitations to qualify for this deduction.

Key points:

• Purchased new for personal use beginning 2025 through 2028
• Final assembly is in the US
• The vehicle weighs less than 14,000 pounds
• Phases out for individual filers with modified adjusted gross income over $100,000 ($200,000 for married)
• It’s an above-the-line deduction so itemizing and non-itemizing taxpayers can deduct it

There’s no new tax form, so for tax preparation you’ll need your purchase agreement and loan statements.