The One Big Beautiful Bill Act created four temporary deductions for tax years 2025 through 2028. They are claimed on the new Schedule 1-A and are available whether you take the standard deduction or itemize. They reduce taxable income, not adjusted gross income.
| Deduction | Maximum | Phase-out starts (MAGI) | Reduction |
|---|---|---|---|
| Qualified tips | $25,000 per return | $150,000 ($300,000 joint) | $100 per $1,000 above |
| Qualified overtime | $12,500 ($25,000 joint) | $150,000 ($300,000 joint) | $100 per $1,000 above |
| Seniors 65+ | $6,000 per eligible person | $75,000 ($150,000 joint) | 6% of MAGI above |
| Car loan interest | $10,000 per return | $100,000 ($200,000 joint) | $200 per $1,000 above |
No tax on tips
Covers voluntary cash or charged tips received in an occupation that customarily received tips before 2025, as listed by the IRS, and reported on a W-2, 1099 or Form 4137. You need a valid Social Security number, and married couples must file jointly.
No tax on overtime
Only the premium part of overtime required by the Fair Labor Standards Act counts: for time-and-a-half, the extra "half". Overtime paid only because of a union contract or state law above FLSA rules does not qualify. Married couples must file jointly.
Enhanced deduction for seniors
Each taxpayer and spouse who is 65 or older by the end of the year can deduct up to $6,000, in addition to the existing additional standard deduction for age (for 2026, $2,050 single or head of household, $1,650 per married person). A Social Security number and, if married, a joint return are required.
Car loan interest
Interest on a loan taken out after December 31, 2024 to buy a new car, SUV, van, pickup or motorcycle for personal use, with final assembly in the United States and secured by the vehicle. Leases and used vehicles do not qualify, and you must report the vehicle's VIN on Schedule 1-A.
TaxPilot applies all four deductions and their phase-outs automatically and fills Schedule 1-A.
Calculate my 2026 taxesRelated: How to file Form 1040 yourself for free.
Official sources
- IRS: One, Big, Beautiful Bill provisions
- IRS: 2025 Schedule 1-A (Form 1040)
- IRS Rev. Proc. 2025-32 (2026 inflation adjustments)
Educational information, not tax advice.
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