New Tax Deductions for 2026 & 2027

The 2025 tax year, under the recent “One Big Beautiful Bill Act,” introduces several new and enhanced deductions and credits.

Key changes include new deductions for seniors, tip income, overtime pay, and car loan interest, along with increases to the standard deduction and the child tax credit

New Deductions (2026 & 2027)

These new deductions can be claimed even if you take the standard deduction and require a new form, Schedule 1-A (Form 1040).

• Seniors Age 65 and Older: An additional $6,000 deduction is available for eligible individuals (or $12,000 for qualifying joint filers), subject to income phase-outs starting at a Modified Adjusted Gross Income (MAGI) of $75,000 ($150,000 for joint filers).
• Qualified Tip Income: A deduction of up to $25,000 is available for individuals in tip-receiving occupations, with income limitations.
• Qualified Overtime Pay: Workers can deduct the overtime portion of their pay, up to a maximum of $12,500 annually ($25,000 for joint filers), also subject to income phase-outs.
• Car Loan Interest: Interest paid on a loan for a new, U.S.-assembled vehicle for personal use is deductible, up to a maximum of $10,000 annually, with income-based phase-outs.

Other Major Changes

Higher Standard Deduction: Standard deduction amounts have increased: $15,750 for single filers, $31,500 for married filing jointly, and $23,625 for heads of household.

State and Local Tax (SALT) Deduction Cap Raised: The cap for itemizers is increased to $40,000 ($20,000 for married filing separately), up from $10,000, and is subject to income limitations.

Increased Child Tax Credit: The maximum credit per qualifying child is now $2,200, an increase from $2,000.

Expiration of Clean Energy Credits: Several clean vehicle credits and certain home energy improvement credits are set to expire in late 2025.