The One Big Beautiful Bill Act (OBBBA), signed into law in 2025, reshapes a number of provisions for the 2026 tax year — some brand new, some permanent extensions of rules that were set to expire. Whether you’re an individual, a tipped or hourly worker, a senior, or a small business owner, several of these changes are worth understanding before you file. As always, the details of how these apply to your return depend on your specific situation.
New Deductions for Individuals
Tips Deduction
Workers who regularly receive tips can deduct up to $25,000 in reported tip income. The deduction begins to phase out for taxpayers with modified adjusted gross income (MAGI) above $150,000 (single) or $300,000 (married filing jointly).
Overtime Pay Deduction
Eligible overtime pay can be deducted up to $12,500 (single) or $25,000 (married filing jointly), using the same $150,000 / $300,000 MAGI phase-out thresholds as the tips deduction.
Deduction for Seniors
Taxpayers age 65 and older may qualify for an additional deduction of $6,000 per qualifying senior ($12,000 for a married couple where both spouses qualify), phasing out above $75,000 (single) or $150,000 (married filing jointly) MAGI.
Auto Loan Interest Deduction
Interest paid on loans for new, U.S.-assembled vehicles can be deducted up to $10,000 per year, phasing out above $100,000 (single) or $200,000 (married filing jointly) MAGI.
SALT Deduction Cap Raised
The state and local tax (SALT) deduction cap — long stuck at $10,000 — is raised significantly for 2026. The cap is now $40,000 (adjusted to roughly $40,400 for 2026, since it rises 1% per year through 2029). For individuals or couples with income above approximately $505,000, the increased cap phases down at a 30% rate as income rises, eventually settling back at the original $10,000 floor for the highest earners. This is a meaningful change for homeowners and residents of higher-tax states like New Jersey.
Qualified Business Income (QBI) Deduction Made Permanent
The 20% pass-through deduction for qualifying business income (Section 199A), previously scheduled to expire, has been made permanent. Starting in 2026, there’s also a new $400 minimum deduction for active business owners with at least $1,000 of qualified business income, along with expanded phase-in ranges that benefit more small business owners near the income thresholds. If you operate as an S-corp, partnership, or sole proprietorship, this is worth reviewing with your tax advisor as part of year-end planning.
Higher Standard Deduction
The standard deduction also increases for 2026 — $16,100 (single), $32,200 (married filing jointly), and $24,150 (head of household). See our 2026 Tax Brackets breakdown for the full picture on rates and thresholds.
What Business Owners Should Watch
Between the permanent QBI deduction, the new minimum deduction, and shifting phase-in ranges, now is a good time to revisit your entity structure, owner compensation, and year-end deduction planning. Several of these new individual deductions — tips, overtime, and auto loan interest in particular — also require specific recordkeeping to substantiate, so getting your documentation in order now will make filing season easier.
This article is for general informational purposes only and does not constitute tax, legal, or financial advice. Tax laws are complex, change frequently, and application depends on your individual circumstances. Please consult with NJTaxpert LLC or another qualified tax professional before making decisions based on this information.
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