OBBBA 2026 Tax Breaks for Workers & Seniors
Key Questions
Who can claim the new deduction for tips under OBBBA?
Tipped workers such as servers, bartenders, rideshare drivers, and hotel staff can deduct up to $25,000 of tips from federal taxes. The deduction applies to qualifying income reported on W-2 or 1099 forms.
What are the limits and sunset date for the overtime deduction?
Workers can deduct up to $12,500 (single) or $25,000 (joint) of overtime premium pay through 2028. Only the premium portion qualifies, and the deduction sunsets after that year.
How much auto-loan interest can taxpayers deduct under the new rules?
Borrowers may deduct up to $10,000 per year in auto-loan interest on Schedule 1-A through 2028. This applies to loans for personal vehicles purchased after the law took effect.
What is the additional standard deduction for seniors in 2026?
Taxpayers age 65 and older can claim an extra $2,050 standard deduction on 2026 returns. This increase is available whether filing singly or jointly.
What is the Child Tax Credit amount for 2026?
The credit is $2,200 per qualifying child, with up to $1,700 refundable. Families must meet income and dependency tests to claim the full amount.
What changed with the 1099-K reporting threshold for 2026?
The threshold resets to $20,000 and 200 transactions, reducing reporting for many gig workers and online sellers. Platforms like Venmo and PayPal will issue fewer forms as a result.
How many people are missing out on tax credits like the EITC?
About 19.2% of workers who qualify for the Earned Income Tax Credit do not claim it. On average, eligible individuals miss roughly $8,300 in credits annually.
What is the IRS doing to help taxpayers with OBBBA changes?
The IRS has updated its Tax Withholding Estimator to reflect the new deductions and credits. The agency is also prioritizing implementation and related rulemakings in its 2026 regulatory agenda.
53M claimed tips/OT deductions; avg refund $3,276 (+12%). Overtime deduction (premium only, $12.5k/$25k caps, 2028 sunset), tip deduction (up to $25k), auto-loan interest deduction ($10k, Schedule 1-A). Child/dependent care credit expanded to 50% max ($3k/$6k for day camp, EIN needed). Senior deduction $2,050 additional. 1099-K threshold reset to $20k/200 transactions. Saver's Match 2027 replaces Saver's Credit. IRS updated withholding estimator. EITC nonclaim rate at 19.2%. Child Tax Credit for 2026 is $2,200 per child, $1,700 refundable. Trump Administration regulatory agenda confirms IRS prioritizing OBBBA implementation and deregulation — rulemakings ahead for R&D, bonus depreciation, business interest cap.