The IRS on May 22, 2026, released its first broad tally of how many filers used the new deductions for overtime pay, car-loan interest and older taxpayers created by last year's tax law, which the administration calls the Working Families Tax Cuts. Together the three breaks accounted for more than $288 billion of deductions. The numbers are large, but the design is deliberately narrow: each deduction shrinks as income rises, and most disappear for the households this publication covers.
What the IRS reported
According to IR-2026-66, issued during IRS CEO Frank Bisignano's visit to Ohio, more than 35 million taxpayers 65 and older claimed more than $193 billion through the enhanced senior deduction. About 29.4 million filers claimed almost $92.7 billion of overtime deductions, and more than 1.4 million claimed about $2.6 billion of car-loan interest. In Ohio alone, about 1.4 million seniors claimed roughly $7.9 billion.
Where the breaks phase out
Each deduction runs for tax years 2025 through 2028 and uses modified adjusted gross income to determine eligibility, according to the IRS summary of the provisions.
| Deduction | Maximum | Phase-out begins, single | Phase-out begins, joint |
|---|---|---|---|
| Senior deduction, age 65+ | $6,000 per person | $75,000 | $150,000 |
| Car-loan interest | $10,000 | $100,000 | $200,000 |
| Qualified overtime | $12,500; $25,000 joint | $150,000 | $300,000 |
| Qualified tips | $25,000 | $150,000 | $300,000 |
The car-loan deduction applies only to loans originated after December 31, 2024, for new personal-use vehicles under 14,000 pounds with final assembly in the United States. The overtime deduction covers only the premium portion of pay above the regular rate, not the full overtime wage.
Who still benefits
Example: a married couple, both 67, with $400,000 of modified adjusted gross income from consulting, pensions and portfolio income sits above every threshold in the table, by $250,000 in the case of the senior deduction. The phase-outs operate gradually rather than as a cliff, but at that distance above the starting points the practical value of these breaks is small or zero.
Several provisions of the same law are more relevant to high earners:
- State and local tax deduction. The cap rose to $40,000, with the higher cap beginning to phase down above $500,000 of modified adjusted gross income, according to Fidelity. The cap returns to $10,000 after 2029.
- Standard deduction. For 2026 it is $32,200 for married couples filing jointly and $16,100 for single filers. The senior deduction, where available, is in addition to the existing extra standard deduction for age.
- Charitable giving. Starting in 2026, non-itemizers can deduct up to $1,000 of cash gifts, or $2,000 for joint filers. Itemizers face a new floor of 0.5% of adjusted gross income, and filers in the 37% bracket see the tax value of itemized deductions capped at 35%.
The after-tax math at the margins
The phase-outs matter most for households near the lines. A retired couple with $160,000 of income, for instance, sits just $10,000 above the $150,000 senior threshold, so the timing of other income can decide how much of the $12,000 combined deduction survives. Common sources of such income include Roth conversions, capital gains distributions, required minimum distributions and a year-end bonus for a still-working spouse. For car-loan interest, a single filer earning $105,000 is only modestly into the phase-out, while one earning $150,000 is well past it.
Points worth discussing with a CPA
- Whether income that is flexible in timing, such as a Roth conversion or harvested gain, could be shifted to keep modified adjusted gross income below a threshold in a given year.
- How the senior deduction interacts with the taxation of Social Security benefits.
- Whether the higher SALT cap changes the itemize-or-standard decision for 2026.
What to watch
All four income-tested deductions are scheduled to expire after 2028. Debate over extending them is likely to intensify before then, and any extension could revisit the income limits.
Sources
- First reported IR-2026-66: IRS CEO Frank J. Bisignano visits Ohio to tout Working Families Tax Cuts provisions — IRS
- Working Families Tax Cuts: Individuals and workers — IRS
- 2026 money moves — Fidelity Investments
After TAX is an independent publication. Articles are general information, not tax, legal or investment advice. Consult a licensed professional about your situation.
