New Tax Breaks for Individuals: What's Temporary and What's Not

A batch of new individual tax breaks is now in effect. Some are temporary, so it helps to know which ones you can build a long-term plan around and which ones you shouldn’t. Here’s a plain-English guide.

The four new deductions (scheduled to end after 2028)

These four are claimed on Schedule 1-A, and you can take them whether you itemize or use the standard deduction. Each phases out at higher incomes.

Deduction	Maximum	Key detail
Tips	$25,000	The tips must be voluntary and from an occupation on the IRS’s tipped-occupation list. Mandatory service charges generally don’t count.
Overtime	$12,500 ($25,000 joint)	Generally only the “half-time” premium required by federal law counts, not all extra pay.
Age 65 and over	$6,000 per person ($12,000 for a couple)	Phases out above $75,000 of income ($150,000 joint). Married couples must file jointly.
Car loan interest	$10,000	Loan taken out after 2024 to buy a new, personal-use vehicle assembled in the U.S., secured by a first lien. Leases don’t qualify.

For the tips, overtime, and senior deductions, you and your spouse need valid Social Security numbers. For the car loan deduction, you need the vehicle identification number (VIN).

Practical tip: Keep pay stubs, W-2s, loan paperwork, and the VIN together. Retirees should also note that withdrawals and investment income can reduce the senior deduction, so decisions about those and the deduction are worth looking at together.

SALT cap: higher, then back down

The cap on state and local tax deductions is $40,400 for 2026 and climbs 1% a year through 2029. In 2030 it returns to $10,000. If you’ve been taking the standard deduction, keep records of your state income and property taxes. Itemizing may pay off again.

Charitable giving

If you don’t itemize, you can deduct up to $1,000 in cash gifts ($2,000 for joint filers). If you do itemize, only the part of your giving above 0.5% of adjusted gross income counts. See our year-end checklist for timing ideas.

Health and family changes

HSAs: Beginning in 2026, Bronze and Catastrophic marketplace plans can pair with a Health Savings Account, and certain direct primary care arrangements are allowed.
Dependent care: The employer dependent care FSA limit is $7,500.
Adoption credit: Up to $5,120 of the 2026 credit can be refundable.
Education and disability savings: More expenses qualify for 529 plans, and more people may qualify for ABLE accounts.

Marketplace health insurance: watch your income

If you receive advance premium tax credits for marketplace coverage, you need to repay any excess you received. The caps that limited those repayments no longer apply starting in 2026. A new job, bonus, or retirement withdrawal can change what you’re entitled to, so update your income estimate with the marketplace during the year.

Trump Accounts

These are new savings accounts for children under 18 with a Social Security number. The government deposits $1,000 for eligible children born from 2025 through 2028. Most other contributions are capped at $5,000 a year in total. Employers can add up to $2,500 a year per employee, and that counts toward the $5,000 limit. Some rules are still being finalized, so ask us before opening one or making large contributions.

What to do before year end

See which of these deductions might apply to you.
Gather the paperwork you’d need to prove it.
Check how changes in your income could affect other benefits.
Don’t count on a temporary deduction in a long-term plan.

Not sure what applies to you? Book a call with FlowTex.

Sources

This article is general information, not tax or legal advice. Eligibility and income limits apply. Talk to a qualified professional about your situation.