Don’t Forget Top 8 deductions when filing your tax return in 2026
29th Dec. 2025
Several new tax provisions can lower your tax bill or increase your refund. However, determining eligibility and gathering the necessary documentation can be confusing for both filers and advisers. For the individuals filing their tax return, below are the top 8 tax deductions that they can avail.
1. Hidden clean vehicle tax benefits
If you have purchased either fuel cell vehicle (FCV) or plug-in electric (EV) before 30th September 2025, you can also avail clean vehicle tax credits. To claim this tax benefit (maximum $7500 for new vehicle and up to $4000 for the used vehicle) you need to file form 8936. Recent buyers should check the purchase dates and retain purchase documents if they plan to claim a credit.
2. New Tax deductions on tips
Workers who receive voluntary cash or charged as tips in customary tipping industries may get more deduction on qualified tip income. Eligible taxpayers can deduct up to $25,000 on the tipped income. The full benefit is only available to those with MAGI below $150,000 ($300,000 for joint filers). Many low-income tipped workers may not gain from this because they owe little or no federal income tax. The draft IRS process again points to Schedule 1-A.
3. No Tax on “qualified” overtime pay
This newly announced deduction covers part of “qualified” overtime pay. It applies only to the overtime portion above an employee’s usual wage. The deductible portion is capped by the “half” of time-and-a-half pay. For example, if you regular pay is $15 and overtime pay is $23, the deductible portion would be $8. The maximum deduction in this category is $12,500 for single filers and $25,000 for joint filers. Full tax value is available when MAGI is under $150,000 ($300,000 joint), with phaseouts and final disallowance above higher thresholds of $275,000 ($550,000 for joint). The deduction’s scope follows the Federal Labor Standards Act, and filers will use Schedule 1-A to claim it.
4. Deduction for your Car loan interest
Interest on loans for your newly baught personal vehicles may also be deductible if the vehicle’s final assembly happened in the United States. Filers should check the Vehicle Identification Number (VIN) for the detail. The deduction is capped at $10,000 per year. It is reduced when MAGI exceeds $100,000 ($200,000 for joint filers) and is disallowed once MAGI passes $149,000 ($249,000 for joint filers). Lenders will eventually report interest paid, but not necessarily this year, so keep loan statements. To claim the break, the IRS draft instructions point to a new Schedule 1-A.
5. Deductions related to child tax credit
While filing tax in 2026 you can use child tax credit to maximum amount of $2,200 per qualifying child, up from the previously scheduled $2,000. The law requires that both parents and qualifying children have Social Security numbers to take the credit. The IRS has published guidance on eligibility and claiming rules.
6. An extra deduction for senior taxpayers
The law creates an additional deduction available to qualifying seniors (65 year or older) for a limited term. It applies per eligible individual and is designed to reduce tax liability for older Americans with modest incomes. They can apply for the $6000 deduction if filing as single, and $12000 if filing jointly with their spouse. Both these deductions will be in addition of the standard deduction.
However, it should be reduced that these benefits will be reduced if your annual gross income is less than $75,000 if filing alone, and $150,000 if filing jointly. And if your gross income is more than $175,000, you will not get this deduction.
7. Standard deduction of $15,750 ($31,500 for joint)
In 2026 you can avail the standard deduction of $15,750 ($750 increase from the last year) for a single filers. For married couples filing jointly it is $31,500 ($1500 increase). For heads of household it is $23,625 ($1125 increase). Most filers can still choose the standard deduction because it exceeds typical itemized totals. These inflation adjustments are official IRS numbers and they matter.
8. New State and local tax deduction
State and local tax deductions (SALT) are capped at a much higher level than before. The SALT cap for itemizers increased to $40,000 (from earlier $10,000). This limit is $20,000 for those who are married and filing separately. Taxpayers can still deduct either state and local income taxes or general sales taxes. In addition, property taxes may be deductible provided they do not push the filer past the cap.
Note: Information is this article is for the purpose of general information only, please consult a Tax consultant for better and accurate results.
Web References on Top 8 Tax deductions:
1. IRS.gov: One, Big, Beautiful Bill Act: Tax deductions for working Americans and seniors.
2. IRS.gov: IRS releases tax inflation adjustments for tax year 2026.
3. IRS.gov: Tax deductions for working Americans and seniors.
4. IRS.gov: Form 1099
5. IRS.gov: About Form 1040