Tax Updates and Resources for 2026
As 2026 begins, all of us here at Wouch Maloney are continually grateful for the opportunity to serve you. We hope that you enjoyed the holiday season and had a chance to spend time with family and friends. As your trusted business advisors, we are here to assist you with navigating the ever-changing tax laws.
Items of Note
On July 4, 2025, President Donald J. Trump signed the One Big Beautiful Bill Act (the “Act”) into law. There are several provisions specific to 2025 that could impact your tax filing, including, but not limited to the following:
State and Local Tax Deduction
For 2025, the Act increased the itemized deduction for state and local taxes from $10,000 to $40,000. The deduction is reduced for those with modified adjusted gross income (“MAGI”) over $250,000 (married filing separately) and $500,000 (all other tax filers). The deduction is capped at $10,000 for taxpayers with MAGI over $600,000. For tax years 2026 through 2029, the cap increases by an additional 1 percent of the prior year limit. In 2030, the state and local tax deduction reverts to the previous $10,000 cap, barring future legislation.
Car Loan Interest Deduction
For tax years 2025 through 2028, individuals may deduct interest paid on a loan used to purchase a qualified vehicle for personal use. The maximum deduction is $10,000 per year. The deduction is reduced by $200 for every $1,000 that your MAGI exceeds $100,000 ($200,000 for joint filers). Qualified vehicles include new cars, pick-up trucks, vans, minivans, sports utility vehicles and motorcycles with a gross vehicle weight of less than 14,000 pounds. Final assembly of eligible vehicles must in the United States. Taxpayers can verify the location of final assembly by checking the vehicle’s VIN through the National Highway Traffic Safety Administration (NHTSA) VIN Decoder.
No Tax on Overtime
The Act introduces a temporary above-the-line deduction for qualified overtime pay . This deduction applies to the “half” portion of “time-and-a-half” compensation as required by the Fair Labor Standards Act. For tax years 2025 through 2028, taxpayers can deduct up to $12,500 (single) or $25,000 (married filing jointly). The deduction phases out for taxpayers with MAGI above $150,000 (single) or $300,000 (married filing jointly), decreasing by $100 for every $1,000 of MAGI over these thresholds.
No Tax on Tips
For employees in occupations where tipping is customary, the Act permits an annual above-the-line deduction up to $25,000 from federal income tax for 2025 through 2028. The deduction is available to both employees and certain self-employed individuals. Similarly, the deduction phases out for taxpayers with MAGI above $150,000 (single) or $300,000 (married filing jointly), decreasing by $100 for every $1,000 of MAGI over these thresholds.
Note that tip and overtime income are still subject Social Security and Medicare taxes.
Deduction for Seniors
For tax years 2025 through 2028, taxpayers age 65 or older are eligible for a new above-the-line deduction of $6,000 ($12,000 for eligible married couples). The deduction is phased out by 6% of MAGI above $75,000 (single) or $150,000 (for joint filers).
Tax Guide (Facts) Chart
To start out the new year, we have included the 2026 Tax Guide on our Resources Page. The chart lists the various federal, state, and local tax rates and limits for payroll taxes, individual income taxes and other tax-related data.
Resources Page
As information for 2026 is made available, we will continuously update the Resources Page on our website. Additional items include the 2026 earned income and business privilege tax rates by county and 2026 income tax due dates.
Keeping Up To Date
Please continue to visit our website and opt-in for our weekly updates for breaking news or important tax law changes. Also, if you are on social media, please follow us on LinkedIn, Facebook, Instagram or X (formerly known as Twitter).
Should you have questions on any matters affecting you or your business, please call 215.675.8364 or email us to speak with a CPA today.
We wish you all the best for a happy, healthy and prosperous new year.
Suzanne Feldman, CPA, MT, Sweta Joshi, CPA and Andre Thickening, EA, MST, CEPA® contributed to this article.
DISCLAIMER: The WM Update, WM Wednesday Wisdom, WM Daily Update, and other related communications are intended to provide general information, as of the date of this communication, and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.
