2026 Tax Prep Explained - What Taxpayers Need to Know

I’ve read through the 800+ pages of the One Big Beautiful Bill, for the items relevant to most US taxpayers. 5 quick bits of Good News:

1.       SALT cap on Schedule A raised from $10k to $40k – big help to homeowners in high-tax states such as CA, NJ and WA.

2.       Seniors – all taxpayers 65 and older qualify for an additional $6k deduction. This replaces the prior senior adjustment of $1,950.

3.       Interest paid on auto loans – now deductible from taxable income, up to $10k.

4.       Tips – If you receive a W2 from your employer that reports tips in Box 7, up to $25k of Box 7 is deductible for those with gross income under $150k.

5.       Overtime – Amounts paid over your hourly rate may be excluded from federal income tax, if reported on a W2.This will require documentation on taxpayers’ part, as there is no separate box on your W2 listing OT pay. If you received OT pay in 2025, be sure to save your final pay statement of the year. This should list your total gross pay, with separate amounts for regular and overtime. That is the only documented method for determining the overtime exclusion.

As a caveat (since the IRS will not make things simple) they’ve added a Schedule 1-A to the standard 1040 for the purpose of claiming these deductions.

We are still waiting for 2025 tax forms and guidance to be finalized at this time. Stay tuned!