What changes on your 2026 tax return

The deductions for qualified tips and qualified overtime both run from 2025 through 2028, and both can be claimed whether or not you itemize. Both need a valid Social Security number, a joint return if you are married, and both phase out when modified adjusted gross income is over $150,000, or $300,000 on a joint return.

Tips: employees and self-employed people in an occupation on the IRS list of occupations that customarily and regularly received tips can deduct up to $25,000 a year of qualified tips, which are voluntary cash or charged tips from customers, including shared tips. A self-employed person’s deduction cannot exceed the net income of the business the tips came from. Self-employed people in a specified service trade or business, and employees of an employer in one, do not qualify.

Overtime: the deduction is up to $12,500 a year, or $25,000 on a joint return. Only the extra half of time-and-a-half counts: qualified overtime is the part of overtime pay required by the Fair Labor Standards Act that is above your regular rate. A worker the Act does not make eligible for overtime has no qualified overtime, whatever a union contract or another law provides.

For 2025 the forms did not have to show tips or overtime separately, and the IRS allowed other ways to work out the figures. That changes for 2026.

For 2026, employers and other payers have to report qualified overtime separately, which they did not have to do for 2025. Forms W-2, 1099-NEC and 1099-MISC are being updated to carry it.

For 2026, Forms 1099-NEC and 1099-MISC have new boxes for tips, and the law requires payers to report certain cash tips and the occupation of the person who received them. For a self-employed worker, tips count for the deduction only if they are reported on an information return.

Payment apps and online marketplaces are back to the Form 1099-K threshold that applied before the American Rescue Plan Act: no form is required unless a person has more than 200 transactions and payments above the restored threshold in the year. The law made the change retroactively, and the threshold is payments totaling more than $20,000 for goods or services through the platform. A platform may still send a form below it.

Card payments work differently: a payment card processor sends a Form 1099-K however few or small the payments were.

Getting no Form 1099-K or 1099-NEC does not make income untaxed; it still goes on the return. Money from friends and family as a gift or as repayment for a personal expense should not be reported on a Form 1099-K. Income from selling goods, including personal items sold at a gain, or from services is reported whether or not a form arrives.

For payments made in 2026, the Form 1099-NEC threshold is higher, so a contractor paid less than it by a client will usually get no form from that client. The threshold is now $2,000, up from $600, for tax years beginning after 2025, and it may be adjusted for inflation beginning in 2027. The same higher threshold applies to most Form 1099-MISC payments, such as rents and other income.

The income is taxable either way. A contractor with several small clients should keep their own record of what each one paid.

The standard deduction rises again for 2026 for every filing status, and people 65 and older can also take the separate senior deduction, which runs from 2025 through 2028.

The senior deduction is an extra $6,000 for each eligible person, or $12,000 for a married couple if both qualify, on top of the additional standard deduction older people already had. You must be 65 by the last day of the year, include your Social Security number and file jointly if married, and it phases out when modified adjusted gross income is over $75,000, or $150,000 on a joint return.