The September 2026 picture on Trump-era taxes splits in two directions: the One Big Beautiful Bill's new individual deductions for tips, overtime, car-loan interest and seniors are now real, filable and documented on a new IRS form — while the administration's across-the-board tariffs were struck down by the Supreme Court in February 2026 and are being refunded to importers. The catch is that tariffs did not go away. Replacement duties under different legal authorities kept the average effective U.S.
tariff rate near 6.7% in July 2026, so the prices you pay did not snap back to 2024 levels. For a household, that means one set of changes that can lower your April tax bill and another that keeps quietly raising the cost of imported goods. This piece covers what you can actually claim, the limits that trip people up, what the tariff ruling did and did not undo, and what to watch between now and the 2028 expiration of the new deductions.
Table of Contents
- The new deductions, and the form you claim them on
- The limits most workers miss
- Why your paycheck did not get bigger
- The tariff ruling — what it undid, and what it didn't
- What this costs you at the checkout
- What to watch next
- Frequently Asked Questions
The new deductions, and the form you claim them on
The IRS has published Schedule 1-A (Form 1040), "Additional Deductions," the single form that totals the four new write-offs and carries the result to Form 1040 line 13b (line 13c on the 1040-NR). According to the IRS announcement of the new schedule, tips, overtime, car-loan interest and the senior deduction all run through that one page.
The caps, per the IRS guidance on Schedule 1-A, are: Two structural points matter more than the numbers. These are deductions, not exclusions — "no tax on tips" is marketing shorthand, and the write-off reduces taxable income rather than erasing the tax. And they are available whether or not you itemize, so a standard-deduction filer can still claim them.
- Qualified tips: up to $25,000
- Qualified overtime: up to $12,500 ($25,000 on a joint return)
- Qualified vehicle-loan interest: up to $10,000
- Seniors 65 and older: $6,000 per person, $12,000 for a qualifying couple
The limits most workers miss
The overtime deduction is narrower than the name suggests. As H&R Block's explainer of the statute describes, only the premium half of time-and-a-half counts — the extra "0.5" portion the Fair Labor Standards Act requires above 40 hours, not the whole overtime paycheck. A worker earning $30 an hour who logs 10 overtime hours has $450 in overtime pay but only $150 of deductible premium. Income limits apply too. The tips and overtime deductions phase out above $150,000 of modified adjusted gross income, or $300,000 on a joint return, per IRS guidance.
And all of it is temporary: these provisions expire after 2028 unless congress extends them. There is also a paperwork gate. Starting with tax year 2026, employers must report qualified overtime separately on Form W-2, box 12, code TT, and employees generally may deduct only amounts reported that way — the IRS added those reporting details in Fact Sheet FS-2026-13 on Aug. 6, 2026, as the Journal of Accountancy reported. If your W-2 shows no code TT and you worked overtime, that is a question for payroll, not something to fix at filing time.
Why your paycheck did not get bigger
A common frustration: the deduction exists, but take-home pay looks unchanged. That is by design. Overtime pay is still subject to normal income-tax withholding, and payroll departments cannot reduce withholding just because a deduction is expected at year-end, according to IRS guidance on the tips and overtime provisions.
The benefit arrives as a smaller tax bill or a larger refund when you file. If you would rather have the money during the year, the mechanism is a revised Form W-4 — not a request to payroll to stop withholding on overtime. Be careful with that lever. Over-adjusting your W-4 can leave you underwithheld and facing a balance due, especially if your overtime hours drop later in the year or your income crosses the phase-out threshold.
The tariff ruling — what it undid, and what it didn't
On Feb. 20, 2026, the Supreme Court ruled 6-3 in *Learning Resources, Inc. v. Trump* that the International Emergency Economic Powers Act does not authorize the President's across-the-board tariffs, invalidating them from inception. IEEPA is an emergency-powers statute; "from inception" means the duties were treated as never validly imposed, which is what opened the door to refunds.
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The scale is large. Roughly 330,000 importers had paid about $166 billion in IEEPA duties across more than 53 million entries; Customs and Border Protection opened its CAPE refund tool on April 20, 2026, and by July 10, 2026 had accepted about $121.75 billion in claims and repaid roughly $86.3 billion with statutory interest, per Norton Rose Fulbright's summary of CBP's refund instructions. Those refunds go to importers of record — the businesses that paid the duty — not to consumers who paid higher shelf prices. The tariffs themselves were rebuilt on other authorities. A 10% Section 122 global surcharge that replaced IEEPA expired by operation of law on July 24, 2026, and was succeeded by Section 301 tariffs of 10–12.5% on imports from roughly 60 economies, alongside Section 232 duties of 50% on steel and aluminum and 25% on copper, according to the Tax Foundation's tariff tracker.
What this costs you at the checkout
The clearest single number is the average effective tariff rate: about 6.7% in July 2026, per the Penn Wharton Budget Model's September 9, 2026 update. That is well above pre-2025 levels, even after the administration lost at the Supreme Court. Read that alongside the deductions rather than separately.
A tipped worker may gain several hundred to a few thousand dollars at filing time while paying more, month by month, on imported goods — appliances, tools, anything with steel, aluminum or copper in it. Whether you come out ahead depends on your income, your hours, and what you buy; there is no single answer that applies to every household. If you run a business that imported between 2025 and early 2026, the refund question is worth checking directly with your customs broker. CBP's process is claim-based, and the gap between the roughly $121.75 billion accepted and the $166 billion originally collected suggests not every eligible entry has been claimed.
What to watch next
One practical step this month: pull a recent pay stub and calculate your actual FLSA premium — half your regular rate times your overtime hours — rather than your total overtime pay. That figure, capped at $12,500, is what you are really deducting.
- Your 2026 W-2, when it arrives in January 2027: confirm box 12 code TT shows your qualified overtime. No code, no deduction.
- The 2028 expiration. All four Schedule 1-A deductions sunset after 2028 absent new legislation, so do not build a long-term plan around them.
- Section 301 and Section 232 actions. These are the authorities now carrying the tariff program, and they move by administrative action rather than by court ruling.
- Your own phase-out position. If a raise or a second earner pushes modified AGI past $150,000 (or $300,000 joint), the tips and overtime deductions begin to shrink.
Frequently Asked Questions
Do I get a tariff refund as a shopper?
No. CBP's refunds go to the importer of record who paid the duty. Consumers who paid higher prices have no claim in that process.
Can I claim the tips deduction if I take the standard deduction?
Yes. Per IRS guidance, the tips and overtime deductions are available whether or not you itemize.
My employer withheld tax on all my overtime. Was that a mistake?
No. Overtime remains subject to normal withholding; the deduction is settled when you file. Adjust a Form W-4 if you want the money sooner.
Both spouses are 65 or older — how much is the senior deduction?
$6,000 per person, so $12,000 for a qualifying couple.
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