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Filing your 2026 taxes means you can claim up to four brand-new above-the-line deductions under the One Big Beautiful Bill Act (OBBBA) — no itemizing required. These cover tips (up to $25,000), overtime pay (up to $12,500), new-car loan interest (up to $10,000), and a senior bonus deduction ($6,000 for ages 65+). This guide shows you exactly how to claim each one and what to expect from your 2027 refund.
KEY TAKEAWAYS
- The 2027 filing season (for tax year 2026) is the first time you can claim the four new OBBBA deductions on an actual return.
- No itemizing needed — all four are above-the-line deductions that stack on top of your standard deduction.
- Tips deduction: up to $25,000/return; phases out above MAGI $150k (single) / $300k (joint). Look for Box 12 code “TP” on your 2026 W-2.
- Overtime deduction: up to $12,500/year ($25,000 joint); same MAGI phase-out. Look for Box 12 code “TT”.
- Car loan interest: up to $10,000 on a US-assembled new personal vehicle; phases out above MAGI $100k/$200k.
- IRS filing opens approximately late January 2027; the deadline is April 15, 2027. Refunds typically arrive within 21 days of e-filing.
What’s New for the 2027 Filing Season?
The 2027 filing season covers income you earned in tax year 2026 — the first full year under the One Big Beautiful Bill Act (OBBBA), signed into law in 2025. Four new deductions affect millions of working Americans directly.
These deductions are above-the-line, meaning you subtract them from your gross income before you hit the standard deduction. You don’t need to itemize. If you take the standard deduction (single: $16,100 / MFJ: $32,200 / HoH: $24,150 for 2026, per IRS), you can still claim all four on top of it.
Here’s a quick overview of what’s new:
| Deduction | Max Amount | Who It’s For | W-2 Code | MAGI Phase-Out |
|---|---|---|---|---|
| No tax on tips | $25,000/return | Tipped workers in 70+ qualifying occupations | Box 12 “TP” | >$150k single / $300k joint |
| No tax on overtime | $12,500/yr ($25,000 joint) | Hourly employees who worked overtime | Box 12 “TT” | >$150k single / $300k joint |
| Car loan interest | $10,000 | New US-assembled personal vehicle buyers | Form 1040 Sch. A / above-the-line | >$100k single / $200k joint |
| Senior deduction | $6,000 | Taxpayers age 65+ | N/A (self-reported) | >$75k single / $150k joint |
Important: These deductions run through 2028 under current law (IRS, 2025). Figures and IRS form codes are based on guidance current as of June 2026 — verify on irs.gov before filing, as forms finalize in fall 2026.
For a deep dive on what these deductions are and how they work legally, see our complete OBBBA tax changes guide. This article focuses on the how to claim steps during the filing season.
When Can You File Your 2026 Taxes?
The IRS typically opens e-filing in late January 2027 (the exact date is announced each fall). The standard deadline is April 15, 2027. If you need more time, you can request an automatic six-month extension to October 15, 2027 — but an extension to file is not an extension to pay, so estimate and pay any amount owed by April 15 to avoid penalties.
Refund timeline: If you e-file and choose direct deposit, the IRS typically issues refunds within 21 days. Paper returns take 6–8 weeks. You can track your refund status at irs.gov/refunds or via the IRS2Go app.
For the full dates, early-filing strategy, and refund tracker tips, see When Can You File 2026 Taxes? 2027 Season Dates, Deadlines and Refund Timeline.
Do You Qualify? A Quick Eligibility Check
All four deductions have income phase-outs based on your Modified Adjusted Gross Income (MAGI — essentially your AGI before certain deductions). If you’re over the threshold, the deduction reduces by $100 for every $1,000 of income above it.
| Deduction | Full deduction if MAGI is… | Phases out completely at… |
|---|---|---|
| Tips / Overtime | ≤$150k single / ≤$300k joint | $400k single / $550k joint (approx.) |
| Car loan interest | ≤$100k single / ≤$200k joint | $200k single / $300k joint |
| Senior deduction | ≤$75k single / ≤$150k joint | $135k single / $210k joint |
Most tipped workers, hourly employees, and middle-income earners fall well under the phase-out thresholds and qualify for the full deduction. Check your 2025 tax return’s AGI line as a rough estimate — your 2026 MAGI may differ if your income changed.
For tipped workers specifically: your occupation must appear on the IRS’s list of qualifying jobs (70+ roles confirmed in final rules). See Do You Qualify for No Tax on Tips? The 70+ Occupations List Explained.
How to Claim Each New Deduction (Step-by-Step)
All four deductions are claimed directly on Form 1040 in the “Adjustments to Income” section (Schedule 1). You don’t need separate forms for most of them — your W-2 does the heavy lifting.
How to Claim the No-Tax-on-Tips Deduction
Your employer reports your qualified tips in Box 12 of your 2026 W-2 using code “TP.” Box 14b will show your Treasury Tipped Occupation Code (TTOC), confirming your job qualifies.
- Get your W-2 in January 2027. Check Box 12 for code “TP” and Box 14b for TTOC.
- Enter the Box 12 “TP” amount on the tips deduction line of Schedule 1 (line TBD — IRS finalizes fall 2026).
- The deduction is capped at $25,000 per return. If your total qualified tips exceeded $25,000, you still only deduct $25,000.
- If your employer didn’t separate tips on your W-2, you may need Form 4137 to calculate and report tip income properly.
Full walkthrough: How to Claim the No-Tax-on-Tips Deduction on Your 2026 Return
How to Claim the No-Tax-on-Overtime Deduction
Your employer reports qualifying overtime pay in Box 12 using code “TT.” This covers overtime under the Fair Labor Standards Act (FLSA) paid at 1.5x or more your regular rate.
- Check your 2026 W-2 Box 12 for code “TT.”
- Enter the amount on Schedule 1. Cap is $12,500 for single filers ($25,000 for married filing jointly).
- If you’re a salaried employee who doesn’t receive FLSA overtime, you don’t qualify for this deduction.
Full walkthrough: How to Claim the No-Tax-on-Overtime Deduction on Your 2026 Return
How to Claim the Car Loan Interest Deduction
This deduction covers interest paid in 2026 on a loan for a new, US-assembled personal vehicle. You’ll need your year-end loan statement showing total interest paid.
- Get your annual mortgage/auto loan interest statement from your lender (similar to Form 1098 for mortgage interest — the IRS may issue a new form for this; check irs.gov in fall 2026).
- The vehicle must have been assembled in the United States and purchased new for personal use.
- Deduct up to $10,000 of interest paid during tax year 2026 on Schedule 1.
- If your MAGI is between $100k–$200k (single), calculate your phase-out reduction before entering the amount.
Full walkthrough: How to Claim the Car Loan Interest Deduction on Your 2026 Return
How to Claim the Senior Deduction (Age 65+)
If you were age 65 or older by December 31, 2026, you can deduct an additional $6,000 above-the-line — no documentation required beyond your date of birth.
- Confirm you meet the age requirement (born on or before December 31, 1961).
- Check your MAGI against the $75k/$150k threshold.
- Enter the deduction amount on Schedule 1. Tax software handles this automatically once you enter your birthdate.
For details on the senior deduction rules, see OBBBA Senior Deduction 2026: How the $6,000 Tax Break Works.
Which Tax Software Handles the New OBBBA Deductions?
All three major tax software platforms have updated for the 2027 filing season to handle the new OBBBA deductions. Here’s how they compare for filers with tips, overtime, or a new car loan:
| Software | OBBBA Deductions | Best For | Starting Price |
|---|---|---|---|
| TurboTax | Yes, guided interview | First-timers, complex returns | Free (simple); Deluxe from $39 |
| H&R Block | Yes, guided interview | In-person option if you want help | Free (simple); Deluxe from $35 |
| FreeTaxUSA | Yes | Budget-conscious filers, DIY-comfortable | Free federal; $14.99 state |
For tipped workers filing with Box 12 codes for the first time, TurboTax and H&R Block both walk you through the new fields with plain-English prompts. FreeTaxUSA covers the deductions at a fraction of the cost if you’re comfortable entering numbers yourself.
For our full comparison with verdict scores, see Best Tax Software for 2027: TurboTax vs H&R Block vs FreeTaxUSA for the New OBBBA Rules.
Filing as a Tipped Worker or Gig Worker?
If your income comes from tips or 1099 work, the 2027 filing season has some important new wrinkles beyond the deductions above.
Tipped workers (servers, bartenders, stylists, rideshare drivers): Your W-2 should now have Box 12 “TP” filled in by your employer. If it doesn’t, contact your employer before filing — you may need to file an amended return or use Form 4137. See the full guide: How to File Taxes as a Tipped Worker in 2027.
Gig workers and 1099 contractors: The 1099-K threshold rules continue to evolve for tax year 2026 — verify the current threshold at irs.gov before filing. If you received a 1099-K from a platform like Venmo, PayPal, or Uber, it reports your gross payments, not your profit. You still deduct your business expenses. See: How to File Taxes as a Gig Worker / 1099 in 2027.
Will Your 2027 Refund Actually Be Bigger?
Probably yes — if you qualify for any of the new deductions and your withholding hasn’t been updated to account for them. Each dollar of above-the-line deduction reduces your taxable income dollar-for-dollar. At a 22% marginal rate, a $10,000 tips deduction saves you $2,200 in federal tax.
That said, refund size depends on how much you had withheld throughout 2026. If you adjusted your W-4 during the year to reflect the new deductions, your refund may be smaller but your take-home pay was higher all year. See the full analysis: Will Your Refund Be Bigger in 2027? How the New Deductions Change Your Return.
How to Read Your New 2026 W-2
Your 2026 W-2 will look different from prior years. Two new Box 12 codes were added specifically for OBBBA deductions:
- Box 12, Code “TP” — Qualified tips eligible for the no-tax-on-tips deduction
- Box 12, Code “TT” — Qualifying overtime pay eligible for the no-tax-on-overtime deduction
- Box 14b — Treasury Tipped Occupation Code (TTOC), confirming your job qualifies for the tips deduction
These codes were added to W-2 reporting for tax year 2026 per IRS guidance. Your employer is required to separate and report these amounts. If any of these boxes are blank and you believe you have qualifying tips or overtime, ask your payroll department to review.
Full decoder: Your 2026 W-2 Decoded: New Box 12 Codes TP / TT and Box 14b TTOC Explained.
The Rest of Your 2026 Return: What Didn’t Change
The OBBBA deductions are new, but most of your return works the same as prior years. Here are the key rules and articles to review for a complete filing:
- Tax brackets and standard deduction: 2026 Tax Brackets and Standard Deduction Amounts
- Child Tax Credit: Child Tax Credit 2026: Amounts, Rules, and How to Claim
- SALT cap: SALT Deduction Cap 2026: What It Means for Your Return
- Estimated taxes (freelancers, self-employed): How to Pay Estimated Taxes in 2026
- 1099-K rules: 1099-K Threshold 2026: What Triggers a Form and What to Do
- Freelancer taxes: Freelancer Taxes 2026: The Complete Guide
- Side hustle income: Side Hustle Taxes 2026: How to Report and Minimize What You Owe
- Crypto: Crypto Taxes 2026: What You Owe and How to Report It
- 529 plan changes: 529 Plan Changes 2026: New Rules and How to Use Them
- New deductions overview: All New Tax Deductions for 2026: What’s on the Table
Frequently Asked Questions
The standard deadline to file your 2026 federal tax return is April 15, 2027. You can request an automatic six-month extension (to October 15, 2027) by filing Form 4868, but any tax you owe is still due by April 15 to avoid interest and penalties.
No. All four new OBBBA deductions (tips, overtime, car loan interest, and senior) are above-the-line deductions. You claim them in the “Adjustments to Income” section on Schedule 1, which means they reduce your AGI whether or not you itemize. You can take the standard deduction and still claim all four.
Contact your employer’s payroll department as soon as possible. Employers are required to report qualified tips (code “TP”) and qualifying overtime (code “TT”) separately for tax year 2026. If the W-2 is incorrect, you can request a corrected W-2C. Do not file with incorrect W-2 data — it may delay your refund or trigger an IRS notice.
Yes — both TurboTax and H&R Block ask about the new OBBBA deductions in their guided interview for tax year 2026. When you enter your W-2 data including Box 12 codes “TP” or “TT,” the software automatically calculates the deduction and applies the MAGI phase-out if applicable. FreeTaxUSA also supports the deductions; the interface is more manual but the math is the same.
No. The OBBBA car loan interest deduction applies only to new vehicles that are assembled in the United States and purchased for personal use. Used cars, leases, and foreign-assembled vehicles do not qualify. The vehicle must also be a personal-use automobile, not a business vehicle (those use a separate deduction method).
Your deduction reduces by $100 for every $1,000 of MAGI above the threshold. For example, if you’re a single filer with MAGI of $160,000 (which is $10,000 above the $150,000 threshold), your tips or overtime deduction is reduced by $1,000. At $400,000 MAGI, the tips and overtime deductions phase out completely for single filers. Your tax software will calculate this automatically once you enter your income.
Bottom line: The 2027 tax season is the first time the new OBBBA deductions show up on real returns — and for most tipped workers, hourly employees, and new-car buyers, they represent a meaningful reduction in taxable income. The key is making sure your W-2 has the right codes before you file.
This article is for informational purposes only and does not constitute tax or financial advice. Tax rules, IRS form codes, and deadlines are based on guidance available as of June 2026 and may change before the 2027 filing season opens. Always verify current figures at irs.gov and consider consulting a CPA or tax professional for your specific situation.
