Tips, Overtime, Senior Bonus, and Auto Loan Interest – What You Need to Know for the 2026 Filing Season

The 2025 tax year (filed in 2026) brings a series of temporary but powerful new tax deductions designed to boost refunds for everyday workers, seniors, and new car buyers. These four “refund booster” deductions can significantly lower taxable income, but each one has its own rules, phase-out limits, and eligibility tests.

To help taxpayers quickly determine which deductions they can claim, we built the Ultimate Four-Deduction Checklist—a simple, quiz-style guide that walks you through the requirements for each deduction:

1. The Tip Income Deduction
2. The Overtime Income Deduction
3. The Senior Bonus Deduction (Age 65+)
4. The Auto Loan Interest Deduction for New Cars

Use this checklist to find out whether you qualify for one, two, or even all four of these new refund-boosting deductions.

Why These Four New Deductions Matter

Each of these deductions is temporary, but together they offer major tax savings for:

• Service workers
• Hourly employees
• Older Americans
• Families buying a new vehicle
• Workers with unstable or variable income

They are designed to offset inflation, reward workforce participation, and help people recovering from financial hardship.

Claiming even one of these deductions can increase your refund. Claiming multiple can significantly reduce your taxable income.

Section 1: Tip Income Deduction Eligibility

Deduct up to $25,000 of reported tip income

Checklist

Ask yourself the following:

1. Did you receive tips in 2025?

Tips must be reported to your employer or on your return.

2. Are your tips subject to federal income tax?

Cash tips, credit card tips, and tips distributed by employers qualify.

3. Do you have Form W-2 with Box 7 (social security tips)?

If so, you are automatically in the qualifying group.

4. Is your Adjusted Gross Income below the income limit?

High earners may be phased out.

If you answered “Yes” to most of the above, you likely qualify.

Result: Tip workers such as servers, delivery drivers, bartenders, hair stylists, and casino employees may deduct a large portion of tip earnings, reducing taxable income and increasing refunds.

Section 2: Overtime Income Deduction Eligibility

Deduct up to $12,500 of overtime pay

Checklist

1. Were you paid overtime wages (time-and-a-half or double time)?

Only traditional overtime wages qualify.

2. Were these wages included on your W-2?

Your employer must report them as overtime.

3. Was your income below the phase-out threshold?

Higher earners receive a partial or reduced deduction.

4. Did you work in a qualifying industry?

Most hourly workers qualify, including:

• Manufacturing
• Warehousing
• Healthcare
• Hospitality
• Retail
• Transportation

If you answered “Yes” to these, you likely qualify.

Result: Hourly workers who logged significant overtime in 2025 may see large refund increases.

Section 3: Senior Bonus Deduction (Age 65+)

Additional $6,000 deduction for qualifying seniors

Checklist

1. Will you be age 65 or older by the end of 2025?

This is the primary requirement.

2. Are you already claiming the standard senior deduction?

This new bonus deduction is in addition to the regular senior standard deduction.

3. Are you below the income phase-out limits?

Most seniors will qualify unless they have unusually high retirement income.

4. Your filing status:

• Single (65+)
• Married Filing Jointly (one or both 65+)

Both spouses may qualify separately.

If you meet these points, you likely qualify.

Result: Seniors gain an extra $6,000 deduction on top of already increased standard deduction amounts, dramatically lowering taxable income.

Section 4: Auto Loan Interest Deduction for New Vehicles

Deduct up to $10,000 of interest on a qualifying new car purchase

Checklist

1. Did you buy a new vehicle in 2025?

Used or leased vehicles do not qualify.

2. Did you finance the purchase?

Only interest paid on the auto loan qualifies.

3. Can you document your loan interest?

You will need:

• Loan statements
• Amortization schedule
• Year-end interest summary

4. Is your income below the phase-out threshold?

The deduction targets low- to moderate-income buyers.

5. Was the car purchased in your name?

Title and financing must match your tax return.

If “Yes” applies, you likely qualify.

Result: Car buyers who financed a vehicle in 2025 may reduce taxable income by thousands.

Quick Quiz: How Many of the Four New Deductions Do You Qualify For?

Answer each “Yes” or “No”:

1. Did you earn taxable tips in 2025?

2. Did you work overtime and receive overtime pay?

3. Will you be age 65 or older by Dec. 31, 2025?

4. Did you purchase a new, financed vehicle in 2025?

Scoring

• 4 Yes answers: You qualify for all four deductions
• 3 Yes answers: You qualify for multiple refund boosters
• 2 Yes answers: You qualify for moderate refund savings
• 1 Yes answer: You still qualify for a valuable deduction
• 0 Yes answers: You may still benefit from other new 2026 provisions

How the Four Deductions Work Together

These deductions are stackable, meaning you can claim all four if eligible.
Stacking deductions allows taxpayers to:

• Reduce taxable income significantly
• Lower tax liability
• Increase refund size
• Offset inflation and rising living costs

For some taxpayers, these combined deductions could reduce taxable income by tens of thousands, resulting in major refunds.

Documentation You Need for Each Deduction

Tip Deduction

• Paystubs
• W-2 showing tips
• Employer tip summary

Overtime Deduction

• Pay history
• Year-end wage summary
• W-2 showing overtime wages

Senior Bonus Deduction

• Proof of age (IRS already has DOB on file)
• Filing status confirmation

Auto Loan Interest Deduction

• Loan contract
• Interest statements
• Purchase agreement
• Vehicle title

Having the right documents prevents refund delays and transcript hold codes like TC 570.

The four new deductions—Tips, Overtime, Senior Bonus, and Auto Loan Interest—offer some of the largest short-term refund boosts in recent tax history.
By using this checklist, taxpayers can easily determine which deductions apply and ensure they collect every dollar they are entitled to in the 2026 filing season.

Knowing your eligibility early also helps you prepare records, avoid delays, and file accurately—maximizing your final refund.