The Internal Revenue Service (IRS) has unveiled substantial updates to federal tax deduction rules for individuals, families, and businesses.
Why It Matters
It follows the passage of the One, Big, Beautiful Bill Act (OBBB), signed into law on July 4, 2025.
These changes, which take effect this year, are designed to provide tax relief across a broad range of categories, from working Americans and seniors to business investment and family support.
What To Know
Notices released by the IRS and U.S. Treasury Department have provided guidance on the broad array of tax deductions and credits newly available or expanded under the OBBB.
Among the most significant reforms are permanent 100 percent bonus depreciation, a new car loan interest deduction, increased standard deduction amounts, and targeted relief for tips, overtime, and child care.
The changes represent one of the most sweeping rewrites of U.S. tax law in recent years and are expected to impact millions of taxpayers and employers across the country.
Notable provisions include:
Permanent 100 Percent Bonus Depreciation
Taxpayers who acquire eligible depreciable property after January 19, 2025, may immediately expense the full cost in the first year, rather than depreciating over several years.
Newly eligible under this rule are certain qualified sound recording productions.
The IRS guidance also details election options, such as opting for a 40 percent or 60 percent deduction on certain property in specific scenarios.
Increased Standard Deduction
For tax year 2026, the standard deduction rises to $32,200 for married couples filing jointly; $16,100 for singles and married filing separately; and $24,150 for heads of households.
‘No Tax on Tips‘
Employees and self-employed individuals in IRS-listed tipped occupations can deduct up to $25,000 per year in qualified tips received from 2025 through 2028. The deduction phases out for individuals earning above $150,000 (or $300,000 for joint filers).
‘No Tax on Overtime‘
The portion of overtime pay exceeding regular pay is deductible up to $12,500 ($25,000 for joint filers), also phasing out at the same income thresholds. Eligibility applies to both itemizing and standard deduction taxpayers, according to an IRS fact sheet.
‘No Tax on Car Loan Interest‘
Interest paid on new made-in-America vehicle loans (originated after December 31, 2024, and under 14,000-pound gross weight) can be deducted up to $10,000 annually, for personal use vehicles only.
Deduction for Seniors
From 2025 to 2028, taxpayers age 65 and above can claim an additional $6,000 deduction ($12,000 for eligible married couples), subject to a phase-out for incomes over $75,000 ($150,000 joint filers).
Other relevant OBBB provisions cover family accounts for dependents (“Trump Accounts”), expanded adoption credits, enhanced earned income and employer child care credits, and business provisions such as opportunity zone tweaks and depreciation rules.
What People Are Saying
The IRS says its latest release “provides taxpayers with guidance on the permanent 100 percent additional first year depreciation deduction for eligible depreciable property acquired after January 19, 2025, provided by the One, Big, Beautiful Bill.
“The notice also provides guidance on certain qualified sound recording productions that the OBBB added as property that may be eligible for the additional first-year depreciation deduction.”
It adds: “Generally, when taxpayers acquire property for business use, they must depreciate it over several years based on various depreciation schedules.”
What Happens Next
The IRS is releasing interim and final guidance on new reporting and compliance requirements associated with these deductions, including for employers, lenders, and tax filers.
Written by Sam Stevenson for Newsweek ~ January 15, 2026