As the 2026 tax season approaches (covering the 2025 tax year), taxpayers should prepare for a significant shift in the landscape. A mix of new legislation—specifically the “One Big Beautiful Bill” (OBBB) signed into law in July 2025—and previously scheduled updates from the SECURE 2.0 Act will introduce new deductions and higher limits that could lower tax bills for many Americans.
Here is a breakdown of the seven biggest changes you need to know before filing your return due on April 15, 2026.
1. A Boost to the Standard Deduction
For the 2025 tax year, the standard deduction is getting a larger-than-usual bump. In addition to the typical annual inflation adjustment, the new law adds an extra 5 percent increase.
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Impact: A married couple filing jointly can reduce their taxable income by an extra $1,500 on top of the inflation adjustment.
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For Seniors & The Blind: Taxpayers age 65+ or legally blind receive an additional standard deduction of $2,000 (single/head of household) or $1,600 per qualifying spouse (joint filers). If you are both 65+ and blind, this bonus doubles.
2. New Deduction for Taxpayers 65 and Older
A new, temporary deduction is available specifically for seniors through the 2028 tax year.
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The Benefit: Taxpayers age 65 or older by the end of 2025 can deduct up to $6,000 (single) or $12,000 (joint, if both spouses qualify).
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Income Limits: The full deduction is available for those with a Modified Adjusted Gross Income (MAGI) under $75,000 (single) or $150,000 (joint). It phases out completely for incomes above $175,000 (single) or $250,000 (joint).
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Flexibility: You can claim this even if you take the standard deduction.
3. SALT Deduction Cap Jumps to $40,000
For those who itemize, the cap on deducting State and Local Taxes (SALT)—which was stuck at $10,000 since 2018—has been significantly raised.
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New Limit: The cap increases to $40,000 for single and joint filers.
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The Catch: High earners may not see the full benefit. The cap is reduced for those with a MAGI over $500,000.
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Future Outlook: The limit is set to increase by 1% annually through 2029 before reverting to $10,000 in 2030.
4. Car Loan Interest Deduction
Buying a new car in 2025 may offer a tax break. Taxpayers can deduct up to $10,000 of interest paid on loans for new vehicles.
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Eligibility: The vehicle must be new (not used), weigh less than 14,000 pounds, and have its final assembly in the U.S.
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Income Limits: The deduction begins to phase out at a MAGI of $100,000 (single) or $200,000 (joint) and is unavailable for incomes above $150,000/$250,000.
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Note: Lenders will send a statement by Jan 31, 2026, detailing the interest paid.
5. “Super” Catch-Up Contributions for Ages 60–63
Thanks to the SECURE 2.0 Act, retirement savers aged 60 to 63 get a massive boost in how much they can contribute to 401(k), 403(b), or 457 plans.
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The Change: The catch-up contribution limit for this specific age group increases to $11,250.
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Total Limit: This allows for a total contribution of $34,750 for eligible workers in 2025.
6. Tax Break for Tipped Workers
Service industry workers can now deduct a significant portion of their cash tips.
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The Benefit: Qualifying workers (e.g., bartenders, waiters, ride-share drivers) can deduct up to $25,000 in cash tips.
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Income Limits: The deduction phases out for MAGI over $150,000 (single) or $300,000 (joint).
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Availability: This deduction is available whether you itemize or take the standard deduction.
7. New Deduction for Overtime Pay
Hourly workers who put in extra time can shield some of that income from taxes.
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The Benefit: Workers can deduct up to $12,500 (single) or $25,000 (joint) of overtime compensation.
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Income Limits: Similar to the tip deduction, this benefit phases out starting at a MAGI of $150,000 (single) or $300,000 (joint).
Disclaimer: Tax laws can be complex. Check with a tax professional to see how these changes apply to your specific financial situation.
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