How to use this calculator
- Enter your tax year, filing status and adjusted gross income. Choose how many filers are 65 or older — that drives the senior deduction.
- Enter each amount that applies to you: qualified tips, the qualified overtime premium and interest on a qualifying new-car loan. Leave any that don’t apply at 0.
- Confirm eligibility for tips and the car loan.
- Review the breakdown. The table shows each deduction after its cap and phase-out, and how much of your total saving it produces.
Need help with one piece? Our single-purpose calculators go deeper: tips, overtime, car loan interest and senior deduction.
The four new Schedule 1-A deductions at a glance
| Deduction | Maximum | Phase-out starts (single / joint) | Phase-out rate |
|---|---|---|---|
| Qualified tips | $25,000 per return | $150,000 / $300,000 | $100 per $1,000 |
| Qualified overtime | $12,500 / $25,000 | $150,000 / $300,000 | $100 per $1,000 |
| Car loan interest | $10,000 per return | $100,000 / $200,000 | $200 per $1,000 (or part) |
| Senior (age 65+) | $6,000 per person | $75,000 / $150,000 | 6% of excess MAGI |
All four apply to tax years 2025 through 2028 and are available to itemizers and non-itemizers alike.
For more detail, see which tipped jobs qualify and how to calculate qualified overtime.
Worked example
Sam and Jordan file jointly with an AGI of $140,000 in 2026. Sam is a restaurant server with $15,000 of tips; Jordan earned a $5,000 overtime premium; and they paid $2,800 of interest on a new U.S.-assembled SUV. Neither is 65.
- All three amounts are under their caps and their income is below every phase-out threshold, so the total Schedule 1-A deduction is $22,800.
- Taxable income falls from $107,800 to $85,000. Part of that comes out of the 22% bracket and part out of the 12% bracket.
- Estimated federal tax savings: about $3,436.
How much Schedule 1-A saves: examples
Schedule 1-A saves the most for households that qualify for more than one deduction and pay tax at 22% or more. Estimated 2026 federal tax savings, with the standard deduction:
| Household | Income | What they claim | Total deduction | Tax saved |
|---|---|---|---|---|
| Single bartender | $45,000 | tips $15,000 | $15,000 | $1,800 |
| Single warehouse worker | $70,000 | overtime premium $8,000 | $8,000 | $1,310 |
| Married nurse and teacher | $160,000 | overtime premium $12,000, car loan interest $3,000 | $15,000 | $3,300 |
| Retired couple, both 65+ | $90,000 | senior (both spouses) | $12,000 | $1,440 |
| Single retiree, 67, new car | $60,000 | car loan interest $2,000, senior (one person) | $8,000 | $960 |
Income includes the tips and overtime. Check each deduction on its own with the tips, overtime, car loan interest and senior deduction calculators.
AGI, MAGI and why these deductions don’t lower them
These deductions are taken after adjusted gross income is calculated — they reduce taxable income, not AGI. That matters because many other benefits depend on AGI or MAGI: ACA premium tax credits, Medicare IRMAA surcharges, the taxation of Social Security benefits and many state programs. Claiming the new deductions won’t improve those, so check them separately with our ACA subsidy and IRMAA calculators.
How long the deductions last
Under current law, all four deductions expire after tax year 2028. Unless Congress extends them, 2028 returns (filed in 2029) are the last on which they can be claimed. Figures such as the tax brackets and standard deduction are adjusted for inflation each year; the caps and phase-out thresholds for these deductions are fixed dollar amounts in the law.
How the calculator works
The per-deduction savings in the table are calculated in order (tips, overtime, car loan, senior), so they add up to the total. We apply the 2025 or 2026 brackets and standard deduction (including the extra amount for filers 65+). The estimate excludes credits, payroll taxes and state taxes — it isn’t tax advice. To see your whole refund, with the child tax credit and the earned income credit, use the tax refund calculator.
Schedule 1-A explained
The One Big Beautiful Bill Act (Public Law 119-21), signed on July 4, 2025, created four temporary federal deductions for tax years 2025 through 2028. They are claimed on a new form, Schedule 1-A (Form 1040). You can claim them whether you take the standard deduction or itemize.
This section explains who qualifies for each deduction, how the caps and income phase-outs work, and the records you’ll need.
The four deductions at a glance
| Deduction | Maximum | Phase-out begins (single / joint) | Reduction |
|---|---|---|---|
| Qualified tips | $25,000 per return | $150,000 / $300,000 | $100 per $1,000 over |
| Qualified overtime | $12,500 / $25,000 joint | $150,000 / $300,000 | $100 per $1,000 over |
| Car loan interest | $10,000 per return | $100,000 / $200,000 | $200 per $1,000 (or part) over |
| Senior (65+) | $6,000 per qualifying person | $75,000 / $150,000 | 6% of the excess |
The phase-outs use modified adjusted gross income (MAGI). For most people, MAGI is the same as the adjusted gross income on line 11 of Form 1040.
1. No tax on tips
Who qualifies:
- Employees and self-employed people who receive qualified tips in an occupation that customarily and regularly received tips on or before December 31, 2024.
- The Treasury Department published the list of qualifying occupations. It includes food and beverage service, personal services such as hairstyling, hospitality, and many transportation and delivery jobs.
What counts:
- Voluntary cash tips, including tips paid by card or check and tips shared through a tip pool.
- Mandatory service charges and amounts the customer couldn’t decline don’t count.
Other rules:
- Married couples must file jointly.
- You need a valid Social Security number.
- For self-employed people, the deduction can’t exceed the net income from the business that earned the tips. Certain specified service businesses are excluded.
Records: your Form W-2 or 1099, and your tip reports to your employer (Form 4070). Starting with 2026 income, the W-2 shows tips in box 12 with code TP. File Form 4137 for any unreported tips.
Estimate yours with the no tax on tips calculator, and see which jobs count in no tax on tips: which jobs qualify.
2. No tax on overtime
Who qualifies: employees who receive qualified overtime compensation, meaning overtime pay required by section 7 of the Fair Labor Standards Act.
What counts: only the premium portion. If you earn $30 an hour and $45 for each overtime hour, only $15 an hour counts.
What doesn’t count:
- Your regular rate of pay.
- Extra premiums required only by state law or a union contract, such as daily overtime or double time beyond the FLSA requirement.
Other rules:
- Exempt salaried employees, who aren’t owed FLSA overtime, can’t claim it.
- Married couples must file jointly.
Records: the qualified overtime amount reported by your employer. For 2025, the IRS gave transition relief, so pay stubs and employer statements can support the figure.
Work out your qualified overtime with the no tax on overtime calculator.
3. Car loan interest
Who qualifies: people who paid interest on a loan that meets all of these conditions:
- it was taken out after December 31, 2024;
- it was used to buy a new vehicle, meaning the original use starts with you;
- the vehicle had its final assembly in the United States;
- the vehicle is for personal use;
- the loan is secured by the vehicle.
Eligible vehicles include cars, minivans, vans, SUVs, pickups and motorcycles under 14,000 pounds gross vehicle weight rating.
What doesn’t count:
- Leases.
- Used vehicles.
- Business vehicles.
- Loans from related parties.
Records: the vehicle’s VIN, which must be reported on your return, and your lender’s statement of interest paid. The final assembly location appears on the vehicle’s window sticker and in NHTSA’s VIN decoder.
Check a loan with the car loan interest deduction calculator.
4. The senior deduction
Who qualifies:
- Each taxpayer who is 65 or older by the end of the tax year and has a valid Social Security number.
- A married couple where both spouses qualify can deduct up to $12,000.
- Married couples must file jointly.
How it interacts with other deductions: it’s in addition to the long-standing extra standard deduction for people 65 and older, and it’s available even if you itemize.
See what it’s worth to you with the senior bonus deduction calculator.
How do the four deductions work together?
Each deduction has its own cap and phase-out, and they all stack. A restaurant server who also earns overtime and bought a qualifying new car could claim three of them. Add a fourth if they’re 65 or older.
Example. Sam and Jordan file jointly with $140,000 of AGI in 2026. Sam has $15,000 of qualified tips, Jordan has a $5,000 overtime premium, and they paid $2,800 of interest on a new U.S.-assembled SUV.
- Their MAGI is below every phase-out threshold, so all three deductions are allowed in full, $22,800 in total.
- Their taxable income falls from $107,800 to $85,000, saving about $3,436 in federal income tax.
Model your own mix with our Schedule 1-A calculator.
What these deductions don’t do
- They don’t reduce AGI. Amounts that depend on AGI or MAGI are unaffected: ACA premium tax credits, Medicare IRMAA, the taxable portion of Social Security, and many credits and state programs.
- They don’t reduce Social Security or Medicare payroll taxes on tips or overtime.
- They may not apply to state income tax. Each state decides whether to follow the federal change.
- They don’t change your withholding automatically. Update Form W-4 if you’d rather see the benefit in each paycheck than as a refund.
Deduction vs. savings
A deduction lowers taxable income, so the tax you save is about the deduction multiplied by your marginal rate. For most households that rate is 10%, 12%, 22% or 24%.
- At 12%, $10,000 of qualified tips saves about $1,200.
- At 22%, the same deduction saves about $2,200.
- If your taxable income is already zero, the deduction saves nothing.
That’s why our calculators run your numbers through the actual federal tax brackets.
What mistakes should you avoid?
- Claiming the full overtime pay instead of just the premium. At time-and-a-half, the qualified amount is one-third of your total overtime pay.
- Assuming any car qualifies. Used cars, leases and vehicles assembled outside the U.S. don’t.
- Filing separately when married. That rules out the tips, overtime and senior deductions.
- Forgetting the timeline. Unless Congress extends them, 2028 is the last tax year for all four deductions.
To see what the deductions do to your refund, together with the child tax credit and the earned income credit, try our tax refund calculator.
Sources:
Frequently asked questions
What is Schedule 1-A?
Can I claim more than one of the new deductions?
Do I have to itemize?
Why is my tax saving smaller than the deduction?
Do married couples have to file jointly?
Sources
- One, Big, Beautiful Bill provisions — Internal Revenue Service
- Forms and instructions — Form 1040 and schedules — Internal Revenue Service
- Public Law 119-21 (H.R. 1), One Big Beautiful Bill Act — Congress.gov
- Tax inflation adjustments for tax year 2026 — Internal Revenue Service