The IRS has officially announced that the 2026 tax filing season begins Monday, January 27, 2026. But this year brings more than just a new filing season—thanks to the One Big Beautiful Bill Act signed into law on July 4, 2025, millions of working Americans can claim significant new tax deductions. These changes are especially important for restaurant owners, service workers, hourly employees, and seniors.

2026 Tax Filing Season Key Dates

Mark these important dates on your calendar:

January 9, 2026: IRS Free File program opens for qualified taxpayers
January 27, 2026: Official start of the 2026 filing season
April 15, 2026: Tax return deadline

The IRS expects to receive approximately 164 million individual income tax returns this year. To claim the new deductions, you'll need to complete the new Schedule 1-A form introduced specifically for these benefits.

No Tax on Tips: Up to $25,000 Deduction

This is the most significant change for service industry workers and restaurant owners. The "No Tax on Tips" provision allows eligible workers to deduct up to $25,000 annually in tip income from their federal taxes.

Eligibility Requirements:

Must work in a tip-receiving occupation (restaurants, bars, hotels, salons, etc.)
Applies to both employees and self-employed individuals
Covers voluntary cash tips, charged tips, and tip sharing arrangements
Income phase-out begins at $150,000 ($300,000 for married filing jointly)

Important: Workers in Specified Service Trades or Businesses (SSTBs) like accounting, law, and consulting are excluded from this deduction.

This provision is effective for tax years 2025-2028.

No Tax on Overtime: $12,500 Deduction

Hourly workers who put in extra hours can now deduct overtime pay from their taxable income. The maximum annual deduction is $12,500 ($25,000 for married couples filing jointly).

What Qualifies:

Compensation exceeding the regular rate under the Fair Labor Standards Act
Traditional time-and-a-half overtime pay
Income phase-out begins at $150,000 ($300,000 for married filing jointly)

For restaurant employees, retail workers, and manufacturing staff who regularly work overtime, this deduction provides meaningful tax relief.

Car Loan Interest Deduction: Up to $10,000

A new deduction allows taxpayers to deduct interest paid on qualifying auto loans. The maximum annual deduction is $10,000.

Requirements:

Loan must have been originated after December 31, 2024
Vehicle must have a gross vehicle weight rating under 14,000 pounds
Final assembly must occur in the United States
Income phase-out begins at $100,000 ($200,000 for married filing jointly)

For small business owners who recently purchased a vehicle, review whether your loan qualifies for this new deduction.

Enhanced Deduction for Seniors (Age 65+)

Taxpayers age 65 or older by year-end can claim an additional deduction of $6,000 per qualifying individual ($12,000 for married couples where both spouses qualify).

Eligibility:

Must be age 65 or older by December 31 of the tax year
Income phase-out begins at $75,000 ($150,000 for married filing jointly)
This is in addition to the standard deduction and other senior benefits

Combined with the increased standard deduction for seniors, this provides substantial tax relief for retirees and older business owners.

New Schedule 1-A Form

To claim these new deductions, the IRS has introduced Schedule 1-A. This form consolidates:

No tax on tips deduction
No tax on overtime deduction
Car loan interest deduction
Enhanced senior deduction

Schedule 1-A will be available when the filing season opens on January 27, 2026. Make sure your tax preparer is familiar with this new form.

How to Prepare for Filing Season

Gather Your Documents:

W-2 forms showing tip income and overtime wages
1099 forms if you're self-employed in the service industry
Auto loan statements showing interest paid in 2025
Proof of age if claiming the senior deduction

Choose Your Filing Method:

Direct deposit: The IRS strongly encourages direct deposit for refunds (paper checks are being phased out)
E-file: Refund status typically appears within 24 hours of e-filing
IRS Free File: Available starting January 9 for qualified taxpayers

Special Considerations for Korean Restaurant Owners

These new deductions are particularly valuable for Korean-American restaurant owners in Los Angeles:

Employee tip income: Your staff can now deduct up to $25,000 in tips. This makes working at your establishment more attractive and helps with retention.
Family members on payroll: If family members work in your restaurant and receive tips or overtime, they can claim these deductions on their personal returns.
Delivery vehicle loans: If you purchased a delivery vehicle after 2024, the interest may be deductible under the new car loan provision.
Senior family business owners: Older restaurant owners can claim the enhanced $6,000 senior deduction in addition to business deductions.

Remember: These are personal deductions claimed on individual tax returns, separate from business expenses.

Income Phase-Out Summary

Deduction	Maximum	Single Phase-Out	MFJ Phase-Out
No Tax on Tips	$25,000	$150,000	$300,000
No Tax on Overtime	$12,500	$150,000	$300,000
Car Loan Interest	$10,000	$100,000	$200,000
Senior Deduction	$6,000	$75,000	$150,000

Avoid Common Mistakes

When claiming these new deductions, be aware of these potential pitfalls:

Documentation: Keep records of all tip income reported and overtime hours worked
Income limits: The deductions phase out at specific income levels—don't assume you automatically qualify
Time limits: These deductions are temporary (2025-2028), so plan accordingly
Digital assets: The IRS reminds taxpayers to report all taxable income, including cryptocurrency transactions
Tax scams: Beware of identity theft schemes related to these new deductions

Trump Accounts for Children

The One Big Beautiful Bill Act also introduced a new savings option: parents and guardians can now establish Trump Accounts (individual retirement accounts) for their children. These accounts are available through trumpaccounts.gov. This is a new way to start building retirement savings early for the next generation.

When to Seek Professional Help

While these new deductions seem straightforward, professional guidance ensures you maximize your benefits:

If you have multiple income sources (tips, wages, self-employment)
If you're close to the income phase-out thresholds
If you own a business with employees who receive tips
If you need bilingual assistance understanding these changes

Conclusion: The 2026 tax filing season brings historic new deductions that benefit working Americans—especially those in the service industry. With up to $25,000 in tax-free tips, $12,500 in tax-free overtime, and enhanced benefits for seniors, these changes can result in significant tax savings. At KSS Accountancy Corporation, our Korean-speaking CPAs can help you navigate these new deductions and ensure you claim every benefit you're entitled to.

Ready to maximize your 2025 tax refund? Schedule a consultation with our bilingual CPA team at (323) 677-4800 to discuss how the new deductions apply to your situation. We serve Korean-American families and business owners throughout Los Angeles and Koreatown.