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The OBBBA created several new above-the-line deductions starting in 2026. Above-the-line means you take them whether you itemize or use the standard deduction, making them available to nearly every qualifying filer. Here is the complete list of what is new in 2026, who qualifies, and how much each deduction is worth.
What “Above-the-Line” Means for You
There are two types of deductions. Below-the-line deductions (itemized deductions) only benefit you if your total itemized deductions exceed the standard deduction ($15,000 single, $30,000 married). Only about 10% of filers itemize. Above-the-line deductions reduce your AGI regardless of whether you itemize. They work for everyone who qualifies.
All the new OBBBA deductions are above-the-line, meaning they are accessible to the 90% of filers who take the standard deduction.
New Deduction 1: Cash Tips (Up to $25,000)
Workers in traditionally tipped occupations can deduct qualifying cash tip income up to $25,000 annually. Phases out starting at $150,000 AGI for single filers. See our full guide: No Tax on Tips 2026.
Tax savings at 22% bracket: Up to $5,500/year.
New Deduction 2: Overtime Premium Pay (Up to $12,500 Single / $25,000 Married)
FLSA non-exempt employees who receive overtime pay can deduct the overtime premium (the extra 0.5x portion of time-and-a-half pay) up to $12,500 for single filers or $25,000 for married filing jointly. Phases out starting at $150,000 AGI. See our full guide: No Tax on Overtime 2026.
Tax savings at 22% bracket: Up to $2,750 single, $5,500 married.
New Deduction 3: Senior Bonus Deduction ($6,000)
Taxpayers who are 65 or older before the end of 2026 receive an additional $6,000 above-the-line deduction. For a married couple both over 65, the combined additional deduction is $12,000. This is on top of the regular additional standard deduction seniors already receive for age.
Phase-out: Begins at $75,000 AGI for single filers and $150,000 for married filing jointly. Reduces by $1 for every $1 of AGI above the threshold until fully phased out.
Tax savings at 22% bracket: Up to $1,320 per qualifying senior ($2,640 for married couple both 65+).
New Deduction 4: Auto Loan Interest for American-Made Vehicles
The OBBBA created a new deduction for interest paid on auto loans for new vehicles manufactured primarily in the United States. Qualifying vehicles must have final assembly in the U.S. under rules similar to the clean vehicle credit criteria. The deduction is capped at $10,000 in interest annually and phases out at higher income levels.
This is an above-the-line deduction, meaning auto loan interest is now deductible for qualifying vehicles even for the 90% of filers who do not itemize. For a borrower paying $3,000/year in interest on a qualifying vehicle loan, this saves approximately $660 at the 22% bracket.
New Deduction 5: Social Security Partial Exclusion (Low-Income Seniors)
Lower-income seniors now have an above-the-line deduction for a portion of their Social Security benefits. Specifically, single filers with combined income under $34,000 and joint filers under $44,000 can deduct a portion of otherwise taxable Social Security benefits. The deduction amount scales with income, with larger deductions at lower incomes.
This complements the existing provisional income rules for Social Security taxation but reduces the tax burden for the lowest-income Social Security recipients.
Deductions That Were Extended or Made Permanent
Beyond the new deductions above, the OBBBA made several previously temporary deductions permanent:
- Section 199A QBI deduction (23%): Self-employed and pass-through business owners can deduct 23% of qualifying business income
- Above-the-line student loan interest deduction: Up to $2,500 in student loan interest is deductible, now permanently
- Tuition and fees deduction: Limited deduction for qualified education expenses now permanent
- Educator expense deduction ($400): K-12 teachers can deduct classroom expenses, limit increased to $400 from $300
What Did NOT Change
To avoid confusion, several things people expected to change did not:
- Capital gains tax rates: unchanged (0%, 15%, 20% at standard income thresholds)
- Traditional IRA contribution limits: $7,000 per year (inflation-indexed, same as prior rules)
- 401(k) contribution limits: $23,500 (inflation-indexed per prior rules)
- Home office deduction for W-2 employees: still NOT deductible (only self-employed can deduct home office)
- Personal interest deduction: credit card interest still not deductible
Maximizing Your 2026 Deductions: Action Steps
- If you receive tips: keep a daily tip diary throughout 2026. You will need documentation of qualifying tip income to claim the deduction.
- If you work overtime: save all pay stubs. Calculate your overtime premium (hours x 0.5 x hourly rate) throughout the year.
- If you are 65+: confirm your AGI stays below $75,000 single/$150,000 married to maximize the senior deduction.
- If you are self-employed: confirm your QBI calculation with a tax professional. The 23% rate and qualifying income rules have nuances.
- If you have auto loan interest on a qualifying vehicle: save your annual interest statement from the lender.
Sources: One Big Beautiful Bill Act (P.L. 119-21); IRS implementation guidance 2026; Kiplinger OBBBA deduction analysis. Some provisions pending final IRS regulations. This article is for informational purposes only. Consult a tax professional for guidance specific to your situation.
