Many Americans stand to collect larger tax refunds this year, whether they itemize or not.
Certain filers can now write off tips, overtime pay and auto loan interest because of changes enacted under last year’s sweeping tax and spending bill. People 65 and older can collect a $6,000 write-off. And the standard deduction has grown, as has the child tax credit.
Many workers may have had more money withheld from their paychecks than needed because the IRS did not adjust withholding tables after Republicans’ One Big Beautiful Bill was signed into law on July 4. Excess withholding is different from a tax cut, of course, but it generally translates into larger refunds because the government returns the overpayment.
Overall, the law disproportionately benefits the wealthy and shifts government benefits from low-income households to higher-earning ones, according to independent analyses. Though most people will see some reduction in taxes, many low-income households lost more in federal benefits like SNAP or Medicaid than they would gain from tax cuts.
Here’s what filers need to know about the new provisions heading into tax season, which begins Monday and runs through April 15:
Tips
Workers in specific jobs — such as bartenders, gambling dealers, DJs, babysitters, tailors, and many more — can deduct as much as $25,000 in tips from their taxable income. They don’t need to itemize; however, married filers must file jointly. Those who earn more than $150,000 (or $300,000 jointly) cannot claim the full deduction.
The new deduction is only available to filers with a Social Security number, which will prevent some immigrants from claiming it.
Next year, employers will have new tax forms for recording their workers’ tips that qualify for the deduction. This year, however, workers will need to figure out their qualifying tips on their own.
The IRS estimates that about 6 million people can claim the new deduction. The Congressional Budget Office estimates they will collectively pay about $10 billion less in taxes this year.
Overtime wages
When workers earn a bonus for working extra hours — the “half” part of those “time-and-a-half” earnings — that money won’t be taxed. The income limitation is the same as those on tips, but the total allowable deduction is capped at $12,500 for an individual and $25,000 for joint filers.
This deduction also requires taxpayers to have a Social Security number and to file jointly if married. It isn’t limited to specific named occupations, though not all workers are entitled to overtime pay under the Fair Labor Standards Act. The number of salaried, full-time workers who are guaranteed overtime based on their wages dropped from roughly 65 percent in the 1970s to 15 percent in 2024, according to the National Employment Law Project. Still, this deduction is one of the more costly ones in the new law, projected to decrease tax revenue by more than $32 billion.
Like tips, the deduction is available whether taxpayers itemize or not. And workers will be responsible for calculating their overtime pay this year, as the IRS will not have forms available until next tax season. Many employers will provide workers with pay statements to help them figure out what they can claim.
Car loan interest
If you took out an auto loan in 2025, you may be able to write off as much as $10,000 in interest. The deduction is Republicans’ response to rising car payments: Consumers are now paying more than $50,000, on average, for a new vehicle, leaving 1 in 5 of them with payments in excess of $1,000 a month.
The deduction is reserved for automobiles that had their “final assembly” in the United States. A long list of popular cars and SUVs from both American and foreign brands are assembled here, but some vehicles won’t qualify. The Nissan Sentra, for example, is assembled in Mexico, and many Toyota Corollas are assembled in Japan. You can look up your own car here.
Only taxpayers with modified adjusted gross income below $100,000, or joint filers below $200,000, can claim the full deduction.
The CBO estimated that the deduction will cost the government $5.4 billion in 2026.
Senior citizens
Taxpayers 65 and older already get a larger standard deduction than younger people. The Republican law bumps it up by $6,000 for low- and moderate-income seniors (individuals with as much as $75,000 in income or joint filers with $150,000). It also allows those seniors who itemize instead of claiming the standard deduction to be eligible for the same additional $6,000 deduction.
Republicans created this deduction instead of exempting Social Security income from taxes, an idea floated by President Donald Trump during his campaign. With the new deduction, few seniors will wind up owing taxes on their Social Security benefits.
The Joint Committee on Taxation has estimated that the enhanced deduction will cost the government more than $17.6 billion a year.
Bigger deductions
The standard deduction rises to $15,750 for individuals, $23,625 for heads of households, and $31,500 for couples filing jointly.
The Republican bill passed in July extended many of the provisions of a 2017 tax law that otherwise would have expired — including a larger standard deduction and no more personal exemptions.
The law increased the maximum Child Tax Credit to $2,200 per child, and the amount of state and local taxes (SALT) that filers can deduct from their taxable income, from $10,000 to $40,000.
The post How to claim tax breaks on overtime, tips and more this filing season appeared first on Washington Post.
