Tax Planning
Maximizing Deductions Under the One, Big, Beautiful Bill for 2026
The One, Big, Beautiful Bill brings new deductions for overtime, car loan interest, tips, and enhanced senior standard deductions — learn how to claim them wisely in tax year 2026.
By NomadicTax Research Team • 5-8 min read • March 7, 2026
## Overview of New Deductions in OBBB Act (2025-2028)
The One, Big, Beautiful Bill introduced major deductions available for tax years 2025 through 2028. These include:
- **Overtime Compensation**: You can deduct the portion of “time-and-a-half” (the portion above your regular rate) of qualified overtime pay. Phase-outs begin at \$150,000 AGI for single filers, \$300,000 for joint. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-of-2025-provisions?utm_source=openai))
- **Car Loan Interest**: Interest on a loan used to purchase a *new qualified vehicle* for personal use, secured by a lien, may be deductible up to \$10,000 annually. Phase-out starts at AGI \$100,000 (single), \$200,000 (joint). Leases don't qualify. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-of-2025-provisions?utm_source=openai))
- **Senior Enhanced Deduction**: Taxpayers aged 65+ may claim an **additional \$6,000 deduction** per qualifying person (married filing jointly = \$12,000) beyond standard deduction. Phases out over \$75,000 (single) / \$150,000 (joint). ([irs.gov](https://www.irs.gov/newsroom/2026-filing-season-updates-and-resources-for-seniors?utm_source=openai))
- **“No Tax on Tips” Deduction**: Tips received in occupations that customarily receive tips (list to be published) are deductible even if using standard deduction. Max \$25,000; same phase-out limits. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-of-2025-provisions?utm_source=openai))
## How to Claim and Qualify
- Use **tax year 2025 or 2026**, but reporting and forms may differ; ensure correct forms/statements like W-2, 1099, or Form 4137. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-act-of-2025-provisions?utm_source=openai))
- Administer AGI phase-outs: know your modified AGI to see if deductions are reduced or eliminated.
- Keep documentation: interest statements, overtime pay statements, tip reports, etc.
- If married filing jointly, both spouses' incomes and eligibility matter for phase-outs.
## Inflation Adjustments & Standard Deduction Increase
For tax year 2026, there are substantial inflation-based increases:
- **Standard Deduction**: \$32,200 for married filing jointly; \$16,100 for singles; \$24,150 for heads of households. ([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai))
- Many credits and thresholds shifted: adoption credit \$17,670; Foreign Earned Income Exclusion \$132,900. ([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai))
## Example Scenarios
- **Overtime**: Jane earned \$180,000 AGI (single). Her overtime pay exceeding regular rate qualifies for the deduction but gets phased-out partially.
- **Senior deduction**: Bob and Sue, both 66 years old, file jointly with AGI \$145,000. They still qualify (under \$150,000 joint threshold) for full \$12,000 senior deduction.
- **Car loan interest**: Al buys a new car Jan 2025 with a loan, not a lease; pays \$800 in interest. This qualifies, provided AGI under \$100,000 (single).
## Planning Tips
- Compute AGI mid-year to estimate eligibility.
- For tipped workers, ensure occupation is listed by IRS before making tips deduction.
- Combine deductions thoughtfully: if itemizing, consider whether these new deductions outweigh benefits lost via standard deduction changes.
These new deductions under the OBBB Act offer powerful tax planning opportunities — stay informed and plan with documentation to maximize benefits.