The four new deductions at a glance
| Deduction | Maximum | Phase-out starts (single / joint) | How it shrinks |
|---|---|---|---|
| Overtime premium | $12,500 / $25,000 joint | $150,000 / $300,000 | $100 per full $1,000 over |
| Qualified tips | $25,000 | $150,000 / $300,000 | $100 per full $1,000 over |
| Car loan interest | $10,000 | $100,000 / $200,000 | $200 per $1,000 or part of it |
| Seniors 65+ | $6,000 per person | $75,000 / $150,000 | 6% of the amount over |
All four apply for tax years 2025 through 2028, need no itemizing, and are claimed on Schedule 1-A. Married couples must file jointly for the tips, overtime and senior deductions.
2026 standard deduction and brackets used here
For tax year 2026 (returns filed in 2027), the standard deduction is $16,100 single, $32,200 married filing jointly and $24,150 head of household. Rates stay at 10%, 12%, 22%, 24%, 32%, 35% and 37%; the 22% bracket starts at $50,400 single and $100,800 joint.
Common questions
What is Schedule 1-A?
A new IRS form, first used for tax year 2025, where you claim four temporary deductions: qualified tips, qualified overtime, car loan interest and the enhanced deduction for seniors. The total goes on Form 1040 and lowers your taxable income.
Do I have to itemize to use these deductions?
No. All four work whether you take the standard deduction or itemize.
Do these deductions lower my AGI?
No. They reduce taxable income, not adjusted gross income, so they don't change other AGI-based limits.
When do they expire?
Tax years 2025 through 2028 under current law.
Is Taxlumo affiliated with the IRS?
No. Taxlumo is an independent, free calculator. Every rule is linked to IRS guidance so you can check it.
Other new deductions
Sources
- IRS FS-2025-03: Tax deductions for working Americans and seniors
- IRS: Tax year 2026 inflation adjustments (Rev. Proc. 2025-32)
- IRS: Schedule 1-A and instructions
- PwC summary of IRS Fact Sheet 2026-13 (overtime FAQs, Aug. 6, 2026)
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