2026 Tax Changes: What They Mean for You When Filing in 2027

An Additional Deduction for Seniors

Eligible taxpayers age 65 or older may qualify for a separate senior deduction through 2028. It is available whether you itemize or take the standard deduction, and it is separate from the existing age-based increase to the standard deduction.

This deduction can reduce taxable income, but income and filing requirements affect eligibility. It does not change the rules that determine how much of your Social Security is included in income.

Retirement often brings a combination of Social Security, pensions, retirement account withdrawals, investments, or part-time earnings. Looking at those sources together helps us determine how the deduction applies to you.

For a broader discussion of retirement tax questions, explore our guide to tax benefits for seniors.

What “No Tax on Tips and Overtime” Means

These deductions may reduce federal taxable income for eligible workers. However, the familiar “no tax” names don’t mean that every tip or overtime payment is free from all taxes.

If You Earn Tips

Your occupation, income, and reporting affect whether your tips qualify. Voluntary customer tips may be eligible, including qualifying electronic payments and shared tips. Mandatory service charges generally are treated differently.

Keep your own tip records as well as the statements you receive. The deduction does not eliminate the need to report tip income or pay applicable payroll taxes.

Our guide explains which tips qualify for the deduction and the requirements to keep in mind.

If You Earn Overtime Pay

The overtime deduction applies to qualifying premium pay required under the federal Fair Labor Standards Act. Generally, that means the extra half of time-and-a-half pay, rather than all the earnings from your overtime hours.

Not every payment labeled “overtime” qualifies. Your pay records and employer statements help identify the eligible amount, which is subject to deduction limits and income requirements.

For eligible workers, these deductions can lower the income used to calculate federal income tax. Social Security and Medicare taxes generally still apply.

Interest on a Qualifying New Vehicle Loan

If you financed a qualifying new vehicle for personal use, some of the interest you pay may be deductible. That gives eligible buyers a tax benefit that generally hasn’t been available for personal vehicle loans.

The deduction has specific requirements:

• The vehicle must be new, with final assembly in the United States.
• The loan must meet the qualifying rules.
• Income limits affect the deduction available.
• Used vehicles and leases do not qualify.

Keep your purchase documents, vehicle identification number, and loan-interest statements. The potential deduction applies to qualifying interest, not your entire vehicle payment.

Tax Benefits for Families

The Child Tax Credit continues to help eligible families reduce their federal income tax. The amount available depends on the qualifying child requirements, income, and other rules. Some families may qualify for a refundable portion, but the entire unused credit does not automatically become a refund.



Beginning in 2026, the Child and Dependent Care Credit has an increased maximum percentage for qualifying expenses. If you pay for eligible care so you can work or look for work, this provision deserves attention.

Changes in your household, custody arrangements, or care expenses can affect which credits you qualify for. Keeping dependent information and childcare records together makes it easier to identify eligible expenses and claim the benefits available to your family.

Small Businesses and Self-Employment

The law makes the Qualified Business Income deduction permanent and changes provisions for deducting eligible equipment purchases. Section 179 expensing and bonus depreciation may allow qualifying businesses to deduct costs sooner, which can affect taxable income and cash available for business needs.

Before making a substantial purchase, consider both its business purpose and its tax treatment. We can help you understand the timing and deduction options as part of your overall tax situation.

Keep Income Records Even If You Don’t Receive a 1099

For 2026, the reporting threshold increases for certain business payments reported on Forms 1099-NEC and 1099-MISC. The change does not apply to every type of 1099.

You may receive fewer forms for smaller contract payments, but taxable income still needs to be reported. Maintaining your own income and expense records helps you prepare an accurate return and document eligible business deductions.

For practical ways to improve your records and avoid common filing problems, read our Small Business Owner Tax Guide: Avoid Costly Mistakes.

Tax Benefits That Have Ended or Changed

Not every change creates a new deduction. Some benefits have ended, and other rules could affect what you owe. Knowing about those changes can help you avoid counting on a credit that is no longer available or facing an unexpected balance when you file.

Home Energy and Clean Vehicle Credits

Certain federal credits for energy-saving home improvements, residential clean energy, and clean vehicles ended earlier under the OBBB. A purchase or project that qualified previously may not qualify under the rules for 2026.

Before including a credit in your plans, check the requirements and applicable dates. Purchase, installation, and other timing details can affect eligibility. IRS guidance on energy and clean vehicle credit expiration dates

Marketplace Health Insurance and Your Tax Return

If advance Premium Tax Credits help pay for your Marketplace health insurance, the amount is based on estimates of your household circumstances. Your tax return compares that assistance with the credit you actually qualify for.

Beginning with the 2026 tax year, the limits that previously capped repayment of excess advance credits no longer apply. If you received more assistance than you qualify for, you must repay the full excess amount.

Reporting income and household changes to the Marketplace promptly can help keep your assistance closer to the correct amount and reduce the chance of an unexpected tax bill.

IRS questions and answers about the Premium Tax Credit

Estate Planning and Farmland Sales

Changes to estate and gift tax exemptions may matter if you’re transferring substantial assets or reviewing an estate plan. Certain qualifying farmland sales also have a new option for paying the related federal income tax in installments.

If you’re considering a significant gift, property sale, or business change, a conversation with your tax professional beforehand can help you understand the tax consequences while there is still time to consider your options.

Common Questions About the OBBB

Get Ready for the 2027 Tax Filing Season

You don’t need to determine every deduction yourself before having your return prepared. Start by gathering your usual tax documents, then add records connected to anything that changed during 2026.

A new job, retirement, childcare expenses, a vehicle purchase, or side work may bring additional tax considerations. Tell us about those changes, even if you aren’t sure they will affect your return.

Start with our downloadable PDF, Tax Preparation Checklist, to organize your paperwork and see which records may apply to your situation.

Helpful Tax Resources

Whether you want to check an official explanation or get your paperwork ready, these resources can help you take the next step.

Official IRS Information

• Individuals and Workers Overview: Working Families Tax Cuts – Individuals and workers
• Specific Deductions Overview: Tax deductions for working Americans and seniors – IRS
• Senior Deduction Eligibility: Check your eligibility for the new enhanced deduction for seniors - IRS

More Resources From Carolina Business Services

• Tax Tips and Resources: Find preparation information and links to official tax tools.
• Complete Tax Planning Guide: Explore deductions, credits, and planning considerations beyond filing season.
  

Personal Help With Your Changing Tax Needs

Online information can help you recognize a tax opportunity. Understanding how it fits your income, family, or business takes a closer look.

At Carolina Business Services, we take time to understand your situation, answer your tax-related questions, and prepare your return with attention to the details that matter to you. Our goal is to help you claim the benefits you qualify for and understand your return.

For more than 45 years, our team has helped people with their tax preparation needs. From our Spindale office, we serve clients throughout Rutherford County, including Rutherfordton and Forest City. Whether you visit us in person or work with us remotely, you’ll receive personal attention from our experienced team.

Call 828-287-9595 or contact Carolina Business Services to get started and check our current office hours. An appointment is not required for an office visit.

Disclaimer: This article provides general information about federal tax changes. Eligibility rules, limits, and exceptions may affect your situation. Contact your tax professional for guidance about your return.