Tax season in 2026 brings some exciting new changes that could help you reduce your taxable income and increase your refund.
Whether you’re a service worker, car buyer, senior, or someone who donates to charity, there are new deductions available that could make a real difference in your refund.
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Below, we break down these six new tax deductions introduced for 2026, highlighting key details, eligibility, and maximum deductions.
What Are Tax Deductions and Why Do They Matter?
Tax deductions are expenses that you can subtract from your taxable income, which in turn lowers the amount of tax you owe.
The more deductions you qualify for, the less income the IRS considers when calculating your tax liability. This could lead to a bigger tax refund or a smaller tax bill.
There are two types of tax deductions: above-the-line (which reduce your gross income before calculating your taxes) and below-the-line (which are typically itemized deductions, taken after your standard deduction).
Six New Deductions That Could Boost Your Refund
Here’s a breakdown of the six new tax deductions available for 2026:
| Deduction Name | Who Qualifies | Maximum Deduction | Key Rules |
|---|---|---|---|
| Charitable Deduction | All taxpayers | $1,000 (single), $2,000 (joint) | Available even if you take the standard deduction. |
| Qualified Tips Deduction | Employees receiving tips | Up to $25,000 | Helps service workers lower taxable income. |
| Qualified Overtime Deduction | Employees earning overtime | Up to $12,500 (single), $25,000 (joint) | Phases out at higher income levels. |
| Car Loan Interest Deduction | Buyers of new U.S.-assembled cars | Up to $10,000 | For personal use only, not business use. |
| Senior Deduction | Seniors 65+ | $6,000 (single), $12,000 (joint) | Phases out at higher income levels. |
| PMI Deduction | Homeowners paying Private Mortgage Insurance (PMI) | Variable | Available if you itemize deductions. |
These new deductions can reduce your taxable income and may result in a higher refund or a smaller tax bill.
How These Deductions Work
1. Charitable Deduction
Even if you take the standard deduction, you can still deduct cash donations to qualified charitable organizations.
This deduction is capped at $1,000 for single filers and $2,000 for joint filers. This makes charitable giving more accessible to a larger number of taxpayers.
2. Qualified Tips Deduction
Service workers, including waiters, bartenders, and taxi drivers, can deduct up to $25,000 of their tip income.
This helps lower taxable wage income, which can be a significant benefit for those who rely on tips as a major portion of their earnings. This deduction helps ensure tip income isn’t fully taxed at the standard rates.
3. Qualified Overtime Deduction
For employees who regularly earn overtime, a qualified overtime deduction is now available. You can deduct up to $12,500 (for single filers) or $25,000 (for joint filers) in overtime wages.
This is especially beneficial for hourly or salaried employees who work extra hours. However, this deduction phases out at higher income levels.
4. Car Loan Interest Deduction
If you bought a new U.S.-assembled car for personal use, you can now deduct up to $10,000 of the interest you paid on your auto loan.
The deduction is only available for personal use, not for business-related use of the vehicle. The deduction also phases out for higher-income earners.
5. Senior Deduction
Seniors over the age of 65 receive an additional deduction of $6,000 for single filers and $12,000 for joint filers.
This helps lower taxable income for seniors who may have limited income sources. However, this deduction phases out at higher Modified Adjusted Gross Income (MAGI) levels.
6. PMI Deduction
Private Mortgage Insurance (PMI) premiums are deductible again, but only if you itemize your deductions.
Previously, PMI was not deductible, but for the 2026 tax year, you can reduce your taxable income by deducting these premiums if you have an eligible mortgage.
Other Tax Changes for 2026
In addition to these new deductions, the standard deduction amounts have been raised for 2026: $16,100 for single filers and $32,200 for joint filers. This means many taxpayers will automatically benefit from a larger standard deduction, which reduces their taxable income and could boost their refund.
With these six new deductions for 2026, taxpayers have a unique opportunity to reduce their taxable income and increase their tax refunds.
Whether you qualify for deductions related to tips, overtime, or car loans, these new benefits can make a significant difference in how much you owe — or how much you receive back. It’s essential to understand the eligibility requirements and to carefully plan your deductions to maximize your tax refund.
FAQs
Can I claim the charitable deduction if I take the standard deduction?
Yes. The new charitable deduction is available even if you take the standard deduction, allowing more taxpayers to benefit from their charitable contributions.
Do I need to itemize to claim the car loan interest deduction?
No. The car loan interest deduction is available for those who bought a new U.S.-assembled car for personal use, without the need to itemize other deductions.
Can seniors under 65 claim the senior deduction?
No. The senior deduction is only available to taxpayers who are 65 years or older.