TL;DR
- ✅ They are deductions, not tax-free pay: Social Security and Medicare still apply
- ✅ All four work with the standard deduction and run through tax year 2028
- ✅ The W-4 worksheet claims each only under a simple income cutoff
- ✅ Total from line 15 of the worksheet goes in Step 4(b)
The four deductions at a glance
| Deduction | Cap | Income limit (single / joint) | Phase-out | W-4 worksheet |
|---|---|---|---|---|
| Qualified tips | $25,000 | $150,000 / $300,000 | $100 per $1,000 over | Line 1a |
| Qualified overtime (the “half” of time-and-a-half) | $12,500 / $25,000 joint | $150,000 / $300,000 | $100 per $1,000 over | Line 1b |
| Car loan interest (new U.S.-assembled vehicle) | $10,000 | $100,000 / $200,000 | $200 per $1,000 over | Line 1c |
| Seniors (age 65 or older) | $6,000 each | $75,000 / $150,000 | 6% of the amount over | Lines 3a, 3b |
“Phase-out” is how much the deduction shrinks once your modified adjusted gross income passes the limit, counted in whole $1,000 steps (the senior deduction uses 6 percent instead). Tips and overtime also need a valid Social Security number, and married filers must file jointly to claim overtime. The detailed rules are on each page: tips and overtime, car loan interest and the senior deduction.
How much is my deduction at my income?
Take your modified adjusted gross income, subtract the limit, divide by $1,000 and round down. Multiply by $100 (tips, overtime) or $200 (car loan), then subtract that from the amount you would otherwise deduct. For example, a single filer with $162,500 of income and $20,000 of tips is $12,500 over, so 12 steps, a $1,200 reduction, and an $18,800 tips deduction. For seniors, take 6 percent of the amount over the limit.
Put all four in your paycheck — free
The calculator has a 2026 deductions section for tips, overtime, car loan interest and age 65+.
Open the W-4 Calculator →Two more lines on the same worksheet
- Cash gifts to charity: if you take the standard deduction, line 12 adds up to $1,000 ($2,000 joint) of cash contributions.
- State and local taxes: for itemizers, line 6b allows up to $40,400 in 2026 ($20,200 married filing separately) when total income is under $505,000 ($252,500 separately).
⚠️ Do not count what you will not qualify for
Entering a deduction you lose to the income limit under-withholds and leaves a bill. The stop-owing guide and the how-much-to-withhold guide show how to check. The overall 2025 law is in how it changes your 2026 W-4.
Frequently asked questions
What are the four new deductions?
Qualified tips (up to $25,000), qualified overtime pay (the extra half of time-and-a-half, up to $12,500, or $25,000 joint), qualified car loan interest (up to $10,000), and a $6,000 deduction for each person age 65 or older. All apply for tax years 2025 through 2028.
Are they really “no tax”?
Not exactly. They are deductions that reduce federal taxable income; they do not remove Social Security or Medicare tax, and they may not reduce state tax. Each phases out at higher incomes.
Do I need to itemize to claim them?
No. All four can be claimed with the standard deduction, on Schedule 1-A of your return.
Where do they go on the W-4?
On the Step 4(b) Deductions Worksheet: line 1a for tips, 1b for overtime, 1c for car loan interest, and lines 3a and 3b for the senior deduction. The total from line 15 goes in Step 4(b).
What if my income is above the limit on the worksheet?
The W-4 worksheet uses a cutoff: if total income is at or above the limit, leave the line blank. You may still get a partial deduction on your return because the real rules phase out gradually.
Key terms in this article
Related guides
No Tax on Tips and Overtime: What to Put on Your 2026 W-4
Tips and overtime are not fully tax-free. What the deductions cover, a worked example, and the W-4 line to use.
Senior Deduction on Your 2026 W-4: $6,000 for Age 65+ and Where It Goes
Who qualifies for the $6,000 senior deduction, how the phase-out works, and the W-4 worksheet lines to use.
Car Loan Interest Deduction on Your 2026 W-4: $10,000 Cap, Who Qualifies
Which car loans qualify, the $10,000 cap, the income phase-out, and how to put it on your W-4.
How the 2025 Tax Law (OBBBA) Changes Your 2026 W-4 Withholding
The One Big Beautiful Bill Act (signed 2025) added deductions for tips, overtime, seniors and car loan interest. Here is where each goes on your 2026 W-4.
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