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By Aliss Higham
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As millions of Americans begin preparing their returns, a new set of federal tax changes is reshaping what many households may owe—or be owed—this year.
The adjustments, introduced under the One Big Beautiful Bill legislation signed into law last summer, include new deductions, an expanded Child Tax Credit, and special provisions for some workers and seniors. The 2026 filing season officially opened Monday, with an April 15 deadline for submitting returns and paying any taxes owed. Several provisions now apply to income earned in 2025, meaning they will affect filings being prepared now. Tax professionals warn that confusion around the details could lead people to miss out on savings or end up making mistakes.
“This is one of the biggest tax seasons we’ve seen in years in terms of change," Lisa Greene-Lewis, a certified public accountant and spokesperson for TurboTax, told Newsweek. "New deductions for tips and overtime, a new senior deduction, and an increased Child Tax Credit mean many filers could see a larger refund or lower balance due, but only if they know what to claim.”
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New Tax Deductions
Among the most notable changes are new deductions aimed at workers who rely on tips or overtime, as well as a new bonus deduction for older Americans. Service workers earning under $150,000 annually can now deduct up to $25,000 in qualified tip income. For those who work overtime, up to 250 hours of this pay may also be deducted, subject to income limits. Taxpayers aged 65 and older can claim an extra $6,000 deduction, with the full amount available to single filers under $75,000 in modified adjusted gross income and married couples under $150,000.
Despite the added complexity, Greene-Lewis emphasized that the process itself does not have to be more difficult. “The good news is these changes don’t necessarily mean filing is harder, but they do mean being more intentional. Two out of five Americans say they know very little about the new tax laws, so it’s important to slow down, review what’s changed, and make sure nothing is missed.”
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No Tax on Tips or Overtime
While the new deductions have been widely described as eliminating taxes on tips and overtime, Michele Frank, a certified public accountant and associate professor of accountancy at Miami University’s Farmer School of Business, cautioned that the reality is more nuanced.
“While many taxpayers are justifiably excited about ‘no tax on tips or overtime,’ taxpayers need to understand that the new rules are subject to a number of exceptions and do not completely eliminate taxes on tips and overtime pay,” she told Newsweek.
Frank explained that all tip and overtime income must still be reported as part of gross income. “The new rules don’t exclude these items from your income. Instead, they allow taxpayers to claim a deduction that reduces their gross income, effectively offsetting amounts included in gross income.”
"In order to get a deduction for tips, the tips must be earned in an occupation that ‘customarily and regularly’ received tips before December 31, 2024,” such as bartenders, baristas, servers, salon workers, food or package delivery workers, movers, and drivers.
Overtime rules are also limited. “Only overtime pay that is mandated by federal law is eligible for the deduction,” Frank said, saying that state-only requirements do not qualify. Only the premium portion above regular pay can be deducted. She provided an example: “If your payroll statement shows that you earned total ‘overtime’ of $15,000 and you are paid time-and-a-half for overtime, you can only deduct $5,000.”
Both deductions are capped and phased out for higher earners. “The maximum amount of tip income that can be deducted on a tax return is $25,000,” Frank said, while overtime deductions are limited to $12,500 for single filers and $25,000 for joint filers. She also stressed that filers must have a Social Security number and, if married, must file jointly to claim the deductions. Payroll and state taxes may still apply.
Bonus Deduction for Seniors
Frank also highlighted the new benefits for older taxpayers: “Starting in 2025, taxpayers who are 65 or older may claim an extra $6,000 deduction per year—an extra $12,000 if you file a joint tax return with your spouse and you are both 65 or older.”
Only older taxpayers who fall within specific income ranges can receive the full $6,000 benefit. The maximum deduction is available to individuals with modified adjusted gross income of $75,000 or less and to married couples earning no more than $150,000, with the amount tapering off as income increases. Once income exceeds $175,000 for single filers or $250,000 for joint filers, the deduction is no longer available.
To qualify, the taxpayer must have turned 65 by the last day of the tax year being filed.
Child Tax Credit Changes
The Child Tax Credit has also been revised. The credit, which helps families offset the costs of raising children, now increases to $2,200 per qualifying child for 2025 and will adjust annually for inflation. The update takes effect immediately and has no end date.
Under the new rules, claimants must have a work-eligible Social Security number to qualify. The credit remains partially refundable, allowing eligible families to receive a portion even if they owe little or no federal income tax.
Greene-Lewis urged families to double-check details before filing: “My biggest advice this year is to file early and not leave money on the table. Gather your documents ahead of time, double-check Social Security numbers for dependents, and don’t assume you don’t need to file just because your income is below the threshold. If you had taxes withheld or qualify for refundable credits like the Earned Income Tax Credit or Child Tax Credit, you could be owed money.”
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