Key Tax Updates 2026

• STANDARD DEDUCTION: Increased to $32,200 for married couples filing jointly, $16,000 for single taxpayers and married individuals filing separately, and $24,150 for heads of households.

• NO TAX ON TIPS

  • Effective 2025 through 2028, employees and self-employed individuals may deduct qualified tips they received in occupations the IRS identified as “customarily and regularly receiving tips” on or before Dec 31, 2024, and are reported on a Form W-2, Form 1099, another furnished to the individual, or on Form 4137 if the individual directly reports the tips.

• NO TAX ON OVERTIME

  • Effective 2025 through 2028, individuals may deduct the portion of the qualified overtime pay that exceeds their regular rate of thr pay (i.e., the “half” portion of “time-and-a-half”).

  • Overtime mist be reported on Form W-2, Form 1099, another statement furnished to the individual, or directly by the individual.

  • Maximum annual deduction is $12,500 ($25,000 for joint filers).

• NO TAX ON CAR LOAN INTEREST

  • Effective 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle for personal use that meets other eligibility criteria. Lease payments do not qualify.

  • Maximum annual deduction is $10,000.

  • Phases out for taxpayers with modified adjusted income over $100,000 ($200,000 for joint filers).

• SALT DEDUCTION CAP INCREASE: The state and Local Tax (SALT) deduction cal will increase to $40,000 for married couples filing jointly (and $20,000 for single filers) for tax years 2026-2029. This is a significant increase from the previous cap of $10,000, allowing homeowners to deduct more of their property taxes and state income taxes.