See how much the new deductions for seniors, tips, overtime, car loan interest and state and local taxes cut your 2026 federal income tax.
Compares 2026 federal income tax with and without these five provisions, using the same 2026 brackets and standard deduction, so it isolates what they save. Income is used as modified AGI for the phase-outs. Doesn't include the Child Tax Credit, local taxes or state tax changes.
| Deduction | You deduct | Tax saved |
|---|
| Income | $0 |
| Deduction without the new rules | $0 |
| Federal tax without the new rules | $0 |
| Deductions with the new rules | $0 |
| Federal tax with the new rules | $0 |
| You save | $0 |
| Deduction | Max | Phase-out starts | Years |
|---|---|---|---|
| Senior (65+) | $6,000 per person | $75K single / $150K joint (−6%) | 2025–2028 |
| Tips | $25,000 | $150K / $300K (−$100 per $1K) | 2025–2028 |
| Overtime premium | $12,500 / $25,000 joint | $150K / $300K (−$100 per $1K) | 2025–2028 |
| Car loan interest | $10,000 | $100K / $200K (−$200 per $1K) | 2025–2028 |
| SALT cap (itemizers) | $40,400 (2026) | $505K (−30%, floor $10K) | 2025–2029 |
The One Big Beautiful Bill Act, signed July 4, 2025, added five new federal deductions that matter for most workers and retirees: up to $25,000 of tips, up to $12,500 of overtime premium pay ($25,000 married), a $6,000 senior deduction for anyone 65 or older, up to $10,000 of interest on a new US-assembled car loan, and a higher cap on state and local tax (SALT) deductions, $40,400 for 2026. All of them phase out at higher incomes. The calculator above adds up what they save you.
The senior deduction is $6,000 per person 65 or older ($12,000 for a married couple who both qualify), for tax years 2025 through 2028. It shrinks by 6% of your modified adjusted gross income above $75,000 (single) or $150,000 (married filing jointly), so it's gone at $175,000 single. For a married couple, each spouse's $6,000 is reduced separately, so both are gone at $250,000. You get it whether or not you itemize.
You can deduct up to $10,000 a year of interest on a loan taken out after December 31, 2024 to buy a new car, SUV, van, pickup or motorcycle for personal use, if its final assembly was in the United States and the loan is secured by the vehicle. You must put the vehicle's VIN on your return. The deduction drops by $200 for every $1,000 of income above $100,000 ($200,000 married), so it's gone at $150,000 single or $250,000 married. It applies for 2025 through 2028.
No. Only loans on new vehicles qualify, meaning the original use starts with you, and lease payments don't count. Refinancing a qualifying loan generally keeps the interest deductible. Business vehicles don't qualify under this rule, but business use of a vehicle has its own deductions.
For 2026 you can deduct up to $40,400 of state and local taxes (income or sales tax plus property tax), up from $10,000 before the law changed. The cap rises 1% a year through 2029 and goes back to $10,000 in 2030. It shrinks by 30% of income above $505,000, but never below $10,000. It only helps if you itemize deductions instead of taking the standard deduction.
Only for SALT. The tips, overtime, senior and car loan interest deductions are taken on top of the standard deduction, so you get them either way. The bigger SALT cap only helps if your itemized deductions (SALT, mortgage interest, charitable gifts and so on) add up to more than the standard deduction: $16,100 single or $32,200 married for 2026. The calculator compares both for you.
Partly. For 2025 through 2028 you can deduct up to $25,000 of qualified tips and up to $12,500 of overtime premium pay ($25,000 married) from federal taxable income. For overtime, only the extra half in time-and-a-half counts, not your whole overtime check. Social Security, Medicare and most state income taxes still apply. Both deductions shrink by $100 for every $1,000 of income above $150,000 ($300,000 married).
No for Social Security and Medicare: those are still taken from all your wages, including tips and overtime. State income tax depends on your state. Many states don't follow these federal deductions, so your state may still tax tips, overtime and the rest. The savings shown above are federal income tax only.
The tips, overtime, senior and car loan interest deductions apply to tax years 2025 through 2028 and then expire unless Congress extends them. The higher SALT cap lasts through 2029 and drops back to $10,000 in 2030. The lower tax brackets and higher standard deduction from the same law are permanent.