2026 Tax Law Changes: Key Deductions and Credits for Individuals
Recent federal tax legislation introduced several new deductions and expanded existing tax benefits for individuals and families.
Some provisions are temporary through 2028, while others are now permanent. Here are several of the most important changes to understand for 2026.
New Deductions for Tips and Overtime
Workers in qualifying tipped occupations may deduct up to $25,000 of qualified tips. The deduction begins to phase out when modified adjusted gross income exceeds $150,000, or $300,000 for married couples filing jointly.
A separate deduction is available for certain qualified overtime compensation, with a maximum deduction of $12,500, or $25,000 for joint filers.
Importantly, the overtime deduction generally applies to the qualifying overtime premium required under federal labor law, not simply all wages earned while working overtime.
Both provisions are currently scheduled to apply through 2028.
New Deduction for Certain Auto Loan Interest
Taxpayers may deduct up to $10,000 per year of qualifying vehicle loan interest through 2028.
The deduction generally applies to loans used to purchase a new vehicle for personal use when the vehicle's final assembly occurs in the United States. Used vehicles and leases do not qualify.
The deduction begins to phase out at modified adjusted gross income above $100,000, or $200,000 for joint filers.
Additional Deduction for Seniors
Individuals age 65 or older may qualify for an additional $6,000 deduction, or up to $12,000 for a married couple when both spouses qualify.
The deduction is available whether the taxpayer itemizes or takes the standard deduction and begins to phase out when modified adjusted gross income exceeds $75,000, or $150,000 for joint filers.
This enhanced deduction is currently available through 2028.
Child Tax Credit Made Permanent
The maximum Child Tax Credit increased to $2,200 per qualifying child, with future inflation adjustments.
The increased credit and higher income phaseout thresholds were made permanent rather than expiring after 2025.
Eligibility still depends on several requirements, including the child's age, dependency status, Social Security number, and the taxpayer's income.
Higher SALT Deduction Limit
The federal deduction for state and local taxes is also significantly higher than the former $10,000 cap.
For 2026, the general limit is $40,400, although the deduction begins to phase down for higher-income taxpayers.
Because the SALT rules include separate income thresholds and planning considerations, taxpayers with significant state income or property taxes should evaluate the deduction as part of their overall tax picture.
New Trump Accounts for Children
Beginning in 2026, eligible children may have a new tax-advantaged Trump Account established on their behalf.
Individuals and employers may generally contribute up to $5,000 annually, subject to applicable rules. A separate federal pilot program provides a one-time $1,000 government contribution for certain eligible children born from 2025 through 2028.
These accounts are designed for long-term savings, and distributions are generally restricted while the beneficiary is a minor.
Final Thoughts
Recent tax law changes created meaningful new opportunities, but many benefits depend on income, filing status, employment, age, and other eligibility requirements.
The best planning opportunity is often not maximizing one individual deduction, but understanding how several provisions interact within your overall tax picture.
Could These Tax Changes Affect You?
If your income or circumstances make one or more of these provisions relevant, proactive tax planning can help determine how the new rules affect your overall federal tax liability.
Weissgarber CPA works with individuals and business owners on proactive tax planning tailored to their broader financial circumstances.
This article is for general informational purposes only and does not constitute tax or legal advice. Tax outcomes depend on individual circumstances and applicable law.