This tax season brings significant changes. Thanks to the recently enacted One Big Beautiful Bill (OBBBA), standard deductions have increased, and several new tax credits and exemptions are now available. Here is how you can maximize your savings.

1. 2026 Standard Deduction Limits

Most taxpayers choose the standard deduction—a fixed amount subtracted from your income. For the 2025 tax year (filed in 2026), these limits have been adjusted:

  • Single / Married Filing Separately: $15,750
  • Married Filing Jointly: $31,500
  • Head of Household: $23,625

Bonus for Seniors: If you are age 65 or older by the end of 2025, you are eligible for an additional deduction of $2,000 (if single/head of household) or $1,600 per person (if married).

2. Standard vs. Itemized Deductions

You should only itemize if your actual deductible expenses exceed the standard deduction amounts listed above.

Key updates for itemizers:

  • SALT (State and Local Taxes): The previous $10,000 cap has been significantly increased to $40,000 ($20,000 if married filing separately). This provides massive relief for homeowners in high-tax states.
  • Mortgage Interest: Remains a primary deduction for homeowners.
  • Charitable Contributions: Even if you take the standard deduction, you can now deduct up to $1,000 ($2,000 for married couples) in cash donations.

3. Tax Credits — Your Direct Dollar Savings

Unlike deductions, credits reduce your tax bill dollar-for-dollar.

Child Tax Credit (CTC)

The maximum credit has increased to $2,200 per qualifying child under 17.

  • Refundable Portion: Up to $1,700 can be returned as a refund even if you owe no taxes.
  • Phase-out: The credit begins to decrease for incomes above $200,000 ($400,000 for married couples).

Earned Income Tax Credit (EITC)

The EITC is a powerful tax credit for working individuals and families with low to moderate income.

  • Credit Amount: For 2026, the maximum credit can reach up to $8,000 depending on your income and the number of qualifying children in your household.
  • Fully Refundable: This is a refundable credit, meaning if the credit amount exceeds your tax liability, you receive the difference back as a tax refund.
  • Income Limits: Eligibility is based on your earned income. Even if you don’t owe any taxes, you should still file a return to claim this benefit.

Education Credits

  • American Opportunity Tax Credit (AOTC): Up to $2,500 for the first four years of post-secondary education.
  • Lifetime Learning Credit (LLC): Up to $2,000 for any professional degree or job-skills training.

4. NEW: Unique OBBBA Exemptions for 2026

The new law introduced several brand-new ways to save that don’t require itemizing:

  • No Tax on Tips: You can now deduct/exempt up to $25,000 of reported tip income from federal taxes.
  • No Tax on Overtime: Qualifying overtime pay is now deductible up to $12,500 for single filers and $25,000 for married couples.
  • Auto Loan Interest Deduction: You can deduct up to $10,000 in interest paid on a loan for a new vehicle, provided it was assembled in the USA.

Summary: The 2026 tax season offers unprecedented opportunities to save, especially with the expanded SALT cap and new exemptions for overtime and tips.

Not sure if your car qualifies or how to claim the new overtime deduction? Leave a comment below or book a consultation with us today!