FEDERAL TAX UPDATE
2025–2028 Federal Tax Law Changes
What changed? New deductions for tips, overtime, car-loan interest and seniors—plus important family and education updates.
A plain-English overview of selected provisions of the One, Big, Beautiful Bill Act. Eligibility depends on your income, filing status, records and other facts.
Educational information only. This guide is not individualized tax, legal or financial advice. Rules and IRS guidance can change. Last reviewed September 10, 2026.
Four New Individual Deductions
Qualified Tips
- Deduct up to $25,000 of qualifying, properly reported tips.
- Available for tax years 2025 through 2028.
- Begins phasing out above $150,000 MAGI, or $300,000 for joint filers.
- Married taxpayers must file jointly; occupation and Social Security number rules apply.
Important: This is an income-tax deduction, not an exemption from Social Security or Medicare taxes.
Qualified Overtime
- Deduct up to $12,500, or $25,000 on a joint return.
- Available for tax years 2025 through 2028.
- Begins phasing out above $150,000 MAGI, or $300,000 for joint filers.
- Only qualifying overtime required under the FLSA counts.
Important: Generally, only the premium above the regular rate—the “half” in time-and-a-half—qualifies, not all overtime wages.
Qualified Car-Loan Interest
- Deduct up to $10,000 of qualifying interest each year.
- For a new, personal-use vehicle assembled in the United States and purchased with a qualifying loan after December 31, 2024.
- Leases do not qualify; the vehicle identification number must be reported.
- Begins phasing out above $100,000 MAGI, or $200,000 for joint filers.
Additional Senior Deduction
- Eligible taxpayers age 65 or older may deduct up to $6,000 each.
- A qualifying married couple may claim up to $12,000.
- Available for tax years 2025 through 2028.
- Phases out above $75,000 MAGI, or $150,000 for joint filers.
Family and Education Updates
Child Tax Credit
The maximum credit increased to $2,200 per qualifying child for 2025 and is indexed for inflation after 2025. Income, relationship, age, residency and Social Security number rules apply.
Child & Dependent Care Credit
Beginning in 2026, the maximum credit rate increases to 50%. The eligible expense limits remain $3,000 for one qualifying individual and $6,000 for two or more. The percentage decreases as income rises.
Education Credit Identification Rules
Beginning in 2026, the taxpayer, spouse when filing jointly and qualifying student generally need work-valid Social Security numbers issued before the return’s due date to claim the AOTC or Lifetime Learning Credit.
Individual Rates and Standard Deduction
The seven individual federal income-tax rates—10%, 12%, 22%, 24%, 32%, 35% and 37%—were made permanent, while bracket thresholds continue to adjust for inflation.
- 2026 standard deduction: $16,100 single or married filing separately.
- 2026 standard deduction: $24,150 head of household.
- 2026 standard deduction: $32,200 married filing jointly or qualifying surviving spouse.
Records to Keep
- Forms W-2, 1099 and employer statements showing qualified tips or overtime.
- Vehicle purchase contract, loan statements, interest paid and the VIN.
- Childcare provider name, address, taxpayer identification number and payment records.
- Social Security numbers and education Forms 1098-T.
- Documents supporting income, deductions and filing status.
Official IRS Resources
- Working Families Tax Cuts: Individuals and Workers
- Qualified Overtime Deduction Questions and Answers
- Child Tax Credit
- Publication 505: Tax Withholding and Estimated Tax
- Education Credits: AOTC and LLC
Not sure which changes apply to you?
We can review your tax situation, identify the records you need and explain the next step before preparation begins.