New Tax Deductions Boost Refunds for Tipped Workers, Overtime Earners, and Seniors

The 'Big Beautiful Bill' expands deductions for several groups of taxpayers, leading to bigger tax refunds this season.

Published on Feb. 23, 2026

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This tax season brings major changes that could put extra cash in the pockets of tipped workers, overtime earners, and seniors, thanks to new deductions included in the 'Big Beautiful Bill' signed into law last year. Tax professionals say the impact could be significant, with the average tax refund already up 14% compared to last year.

Why it matters

These expanded deductions aim to provide financial relief to key groups of taxpayers, including service industry workers, those putting in extra hours, and retirees. The changes reflect a broader effort by lawmakers to support working families and seniors through the tax code.

The details

The new law allows tipped workers to deduct up to $25,000 in qualified tip income, overtime earners to deduct up to $12,500 in overtime pay, and Americans 65 and older to claim an additional $6,000 senior deduction (or up to $12,000 for married couples). There is also a deduction for those who purchased a vehicle assembled in the United States in 2025.

  • The 'Big Beautiful Bill' was signed into law last year.
  • The new tax deductions are in effect for the 2026 tax season.

The players

Mark Steber

A tax professional with 40 years of experience at Jackson Hewitt Tax Service.

Internal Revenue Service

The federal agency responsible for administering and enforcing federal tax laws.

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What they’re saying

“We are not only expecting bigger refunds, but a lot bigger refunds.”

— Mark Steber, Tax Professional, Jackson Hewitt Tax Service

“It was put on there to offset some of the Social Security taxation. You don't have to be getting Social Security to be getting the new deduction.”

— Mark Steber, Tax Professional, Jackson Hewitt Tax Service

What’s next

Early filing data from the IRS shows the average tax refund is about 14% higher so far this season compared to last year, indicating these changes are already making a difference. Tax professionals encourage filers to review the new deductions carefully or consult a tax expert to ensure they're taking advantage of every benefit available.

The takeaway

The expanded tax deductions in the 'Big Beautiful Bill' are providing much-needed financial relief to tipped workers, overtime earners, and seniors, leading to bigger tax refunds this season. These changes reflect a broader effort by lawmakers to support working families and retirees through the tax code.