IRS Updates Standard Deduction Amounts for 2026: How Taxpayers Can Maximize Savings

Overview

For the 2026 tax year, the rules have changed significantly compared to previous projections. Thanks to the passage of the One Big Beautiful Bill Act (OBBBA) in July 2025, the "tax cliff" that was expected to slash the standard deduction has been averted. Instead, these amounts have been permanently extended and increased for inflation.

Here is the updated guide for your 2026 tax planning.

1. Official 2026 Standard Deduction Amounts

The IRS has adjusted the standard deduction for inflation to ensure your "tax-free" income keeps pace with the cost of living. For the 2026 tax year (returns filed in 2027), the amounts are:

2. The New $6,000 Senior "Bonus"

One of the most impactful changes under the current law is the Senior Bonus Deduction. If you or your spouse is age 65 or older, you are eligible for a massive boost to your deduction.

• The Benefit: An additional $6,000 deduction per person.
• Stacking: This is in addition to the existing additional standard deduction for seniors (which is $1,550 for married individuals or $1,950 for singles in 2026).
• Example: A married couple, both over 65, could see a total deduction of $47,300 ($32,200 base + $12,000 OBBBA bonus + $3,100 age-based addition).

3. New "Above-the-Line" Deductions

Even if you take the standard deduction, current law now allows you to "stack" certain additional savings that were previously only available to those who itemized:

• No Tax on Tips & Overtime: Under the OBBBA, qualified tip income and up to $12,500 of overtime pay can be deducted from your taxable income.
• Car Loan Interest: For the first time, interest paid on loans for U.S.-assembled vehicles is deductible up to $10,000 (phased out for joint filers earning over $200,000).
• Universal Charitable Deduction: You can deduct up to $1,000 (Single) or $2,000 (Joint) in cash donations to charity without having to itemize.

4. The SALT Cap Increase

For those who do choose to itemize (typically homeowners with high property taxes), the limit on the State and Local Tax (SALT) deduction has been increased from $10,000 to $40,000 for the 2026 tax year. This makes itemizing a much more viable strategy for families in high-tax states.

Strategy: Should You Itemize or Take the Standard?

With the standard deduction now over $32,000 for couples, most people will still find it more beneficial to take the flat amount. However, you should consider itemizing if the sum of your SALT (up to $40k), mortgage interest, and medical expenses exceeds the $16,100/$32,200 threshold.

Note: Be sure to keep your 2026 pay stubs if you work overtime; your W-2 will now feature a specific box for "Qualified Overtime" to help you claim that new deduction.