What do the new tips, overtime, senior and car-loan-interest deductions save me?
Enter what you earned in tips, overtime pay and vehicle loan interest, and see what each deduction allows at your income and what it saves on your 2026 federal tax.
Filing status
You are 65 or older by December 31, 2026
Adds the $6,000 senior deduction, which shrinks as income rises past $75,000 ($150,000 joint).
WHAT THE NEW DEDUCTIONS SAVE YOU
$720for 2026
As a single filer with $140,650 of adjusted gross income, you can deduct overtime $3,000 (of $3,000 entered) and vehicle loan interest $0 (of $1,500 entered), the rest being lost to the income limits. That is $3,000 in all, cutting 2026 federal income tax from $22,490 to $21,770, a saving of $720. Social Security and Medicare tax are not reduced.
Deductions allowed
$3,000
Tax without
$22,490
Tax with
$21,770
Tax saved
$720
UNDERSTAND YOUR RESULT
Terms:Standard deduction
What you entered against what is allowed at your income
Entered (or the most allowed)Allowed at your income
Overtime premium
$3k
$3k
Vehicle loan interest
$2k
$0
Each deduction has a cap and shrinks as adjusted gross income rises: tips and overtime by 10 cents per dollar over $150,000, vehicle loan interest by $200 for every $1,000 over $100,000, and the senior deduction by 6 cents per dollar over $75,000. At $140,650 you may take $3,000.
How much of each deduction is left as income rises (at the most each allows)
TipsOvertimeVehicle loan interestSenior
The lines show the largest each deduction could be at any income for a single filer (the senior line is for one person aged 65 or older). Yours are $0 for tips, $3,000 for overtime, $0 for vehicle loan interest and $0 for the senior deduction.
What each saves if it were your only new deduction
| Deduction | Allowed | Tax saved on its own |
|---|---|---|
| Overtime premium | $3,000 | $720 |
| Vehicle loan interest | $0 | $0 |
| All together | $3,000 | $720 |
Taken together they save $720. Each deduction is worth your top bracket rate on the part allowed.
What moves the needle
Each row re-runs the calculation with one change. Click to apply.How it's computed
FORMULA
Income for the limits = income − pre-tax contributions (adjusted gross income; no foreign-income exclusions)
Tips = the smaller of your qualified tips and $25,000, less 10% of the income over $150,000 ($300,000 joint)
Overtime = the smaller of your overtime premium and $12,500 ($25,000 joint), less 10% of the income over $150,000 ($300,000 joint)
Vehicle loan interest = the smaller of the interest and $10,000, less $200 for each $1,000 or part over $100,000 ($200,000 joint)
Senior = $6,000 for each person 65 or older, less 6% of the income over $75,000 ($150,000 joint)
Tax saved = 2026 federal tax without these deductions − tax with them, taken on top of the standard or itemized deduction
- These deductions apply to tax years 2025 through 2028. The figures are the 2026 federal income tax; state tax is not modelled and states differ on whether they follow.
- Qualified tips are tips you received in an occupation that customarily and regularly received tips before 2025, reported on your return. Qualified overtime is only the pay above your regular rate that the Fair Labor Standards Act requires (the extra half of time-and-a-half). Tips received in a business of your own count only up to that business’s net income, and tips from some specified service trades do not qualify. Overtime under that law is for employees. You need a Social Security number on the return. Check the IRS guidance for your job.
- Vehicle loan interest counts for a loan taken out after 2024 to buy a new (original use with you) vehicle for personal use, secured by the vehicle, assembled in the United States; you must include the vehicle identification number on your return. Leases and used vehicles do not qualify.
- The deductions lower taxable income, not adjusted gross income, so they do not change the income used for the limits. For tips and overtime the reduction is worked at 10 cents per dollar over the threshold; the IRS’s worksheet may round income up to the next $1,000, which can change a deduction by up to $100.
- A married person can claim the tips and overtime deductions only on a joint return. None of these deductions reduces Social Security and Medicare tax, and they can be claimed whether or not you itemize.
- The overtime and vehicle loan amounts on the page as loaded are examples, not your numbers.
WORKED EXAMPLE · SAMPLE NUMBERS
Income: $145,000 − $4,350 pre-tax = $140,650. Overtime: the smaller of $3,000 and $12,500, less 10% × ($140,650 − $150,000) if over = $3,000. Vehicle loan interest: the smaller of $1,500 and $10,000, less $200 for each $1,000 or part of $40,650 over $100,000 = $0. Tax without them $22,490; with $3,000 more deducted $21,770; saved $720.
SOURCES
[1]26 U.S. Code § 224: Deduction for qualified tipsLegal Information Institute, Cornell Law School[2]26 U.S. Code § 225: Deduction for qualified overtime compensationLegal Information Institute, Cornell Law School[3]26 U.S. Code § 163(h)(4): Qualified passenger vehicle loan interestLegal Information Institute, Cornell Law School[4]Questions and answers about the new deduction for qualified overtime compensationInternal Revenue Service[5]Notice 2025-69: Guidance for individual taxpayers who received qualified tips or qualified overtime compensation in 2025Internal Revenue Service[6]One, Big, Beautiful Bill provisionsInternal Revenue ServiceHSBuilt by Hussain Sehorewala · checked against worked examples · Sep 29, 2026
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Questions about this result
For tax years 2025 through 2028: a deduction for qualified tips (up to $25,000), one for qualified overtime pay (up to $12,500, or $25,000 on a joint return), one for interest on a loan for a new US-assembled passenger vehicle bought for personal use (up to $10,000), and a $6,000 deduction for each person aged 65 or older. They are deductions from income, so they save your bracket rate on the part allowed, whether or not you itemize.
No. They lower federal income tax only. Social Security and Medicare tax are still withheld on your tips and overtime in full.
Only the pay above your regular rate that the Fair Labor Standards Act requires. For time-and-a-half that is the extra half, not the whole overtime paycheck. Overtime you receive beyond what that law requires does not count. Your W-2 or your employer’s year-end statement should show it.
They are based on modified adjusted gross income. Tips and overtime shrink by $100 for every $1,000 over $150,000 ($300,000 joint); vehicle loan interest by $200 for every $1,000 or part over $100,000 ($200,000 joint); the senior deduction by 6 cents per dollar over $75,000 ($150,000 joint). On the example on this page, an income of $140,650 leaves the overtime deduction whole and takes the vehicle loan deduction to zero.
A loan taken out after December 31, 2024, to buy a new vehicle for personal use, secured by that vehicle, with its final assembly in the United States, and you must put the vehicle identification number on your return. Leases and used vehicles do not qualify.
State tax, whether your job counts as one that customarily receives tips, the special rules for self-employed workers, and the exact worksheet rounding the IRS uses. It applies your top bracket to the part allowed and does not decide whether an item qualifies.
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