IRS Announces 2026 Filing Season: What You Need to Know About Filing and New Tax Deductions

The IRS announced January 26, 2026, as the first day of the 2026 filing season for 2025 tax returns. This year introduces Schedule 1-A, a new form allowing taxpayers to claim recently enacted deductions including no tax on tips, no tax on overtime, no tax on car loan interest, and enhanced deductions for seniors. These deductions, enacted under the One Big Beautiful Bill, apply retroactively to January 1, 2025, meaning your 2025 tax return filed in 2026 qualifies.

In this article we explain what Schedule 1-A is and which deductions you can claim, how the no tax on tips deduction works, and how the no tax on overtime deduction reduces taxable income. We also cover what Trump Accounts are and how to establish retirement accounts for children, what Form 1099-DA requires and how cryptocurrency brokers report digital asset transactions, and how to use IRS online tools to track refunds, access tax records, and file returns electronically.

When does the 2026 filing season start

The IRS begins accepting 2025 tax returns on Monday, January 26, 2026. Taxpayers have until Wednesday, April 15, 2026, to file returns and pay any tax due.

IRS Free File opens earlier

The IRS Free File program began accepting returns on Friday, January 9, 2026—17 days before the official filing season started. Qualified taxpayers (generally those with adjusted gross income below certain thresholds) can use IRS Free File partner software to prepare and e-file returns starting January 9.

IRS Free File Fillable Forms—available to taxpayers of all income levels—become available January 26 when the filing season officially opens.

How many returns will the IRS process?

The IRS expects to receive approximately 164 million individual income tax returns during the 2026 filing season. Most taxpayers—over 90%—file electronically using tax software, online platforms, or tax preparers.

What is Schedule 1-A?

Schedule 1-A is a new IRS form introduced for tax year 2025 that taxpayers use to claim deductions enacted under the One Big Beautiful Bill. The form allows you to deduct qualified tips, qualified overtime compensation, car loan interest, and enhanced amounts for seniors from your taxable income.

Schedule 1-A is a below-the-line deduction

All deductions claimed on Schedule 1-A are "below-the-line" deductions. That means they're reported on Form 1040 below the line for adjusted gross income (AGI).

Below-the-line deductions don't reduce your AGI—they reduce your taxable income after AGI is calculated. Your AGI remains the same, but your taxable income decreases, lowering your overall tax bill.?

AGI matters for determining eligibility for other credits and deductions that phase out at higher AGI levels (like IRA contribution deductions, education credits, or ACA premium subsidies). Schedule 1-A deductions don't help you qualify for those AGI-based benefits—but they still reduce the amount of income subject to federal income tax.

Note: Schedule 1-A is not optional if you're claiming these deductions. You must complete Schedule 1-A and submit it with your Form 1040. Simply reducing your taxable income without attaching Schedule 1-A will trigger IRS notices and potential audits.

How the no tax on tips deduction works

The no tax on tips deduction allows workers who receive tips to deduct up to $25,000 in qualified tips from taxable income for tax years 2025 through 2028.

What are qualified tips?

Qualified tips include cash tips received directly from customers, tips added to credit card or debit card payments that employers distribute to you, tips from tip-pooling or tip-sharing arrangements, and any other tips you report to your employer or report as income on Form 4137 (if you're required to report unreported tips).

Tips must be reported on your W-2 in Box 7 (Social Security tips), or reported by you on Form 4137 if your employer didn't withhold taxes on certain tips.?

Deduction limits

You can deduct up to $25,000 in qualified tips annually. If you earned $30,000 in tips during 2025, you can deduct $25,000—the maximum. If you earned $18,000 in tips, you deduct $18,000 which is your full tip amount.

Income phase-out

The no tax on tips deduction begins phasing out when your modified adjusted gross income (MAGI) exceeds $150,000 for single filers or $300,000 for married couples filing jointly.

The phase-out reduces the deduction amount as income increases above these thresholds. The IRS has not yet published specific phase-out rates or complete phase-out income levels.

Who benefits from the no tax on tips deduction?

Approximately 6 million tipped workers are expected to benefit from this deduction. This includes restaurant servers and bartenders, hotel and casino workers, hairstylists and barbers who receive tips, food delivery drivers receiving tips, and any other service workers who report tips as income.

How the no tax on overtime deduction works

The no tax on overtime deduction allows workers who receive overtime pay to deduct qualified overtime compensation from taxable income for tax years 2025 through 2028.

What is qualified overtime compensation?

Qualified overtime compensation (QOC) is the portion of your overtime pay that exceeds your regular rate of pay. If your regular hourly rate is $20 and you're paid $30 per hour for overtime (time-and-a-half), the extra $10 per hour is qualified overtime compensation.

Your employer calculates this amount for you and reports it separately on your W-2 or 1099.

Deduction limits

You can deduct up to $12,500 in qualified overtime compensation annually if filing single, or $25,000 if married filing jointly.

Income phase-out

Under the One Big Beautiful Bill, the no-tax-on-overtime deduction begins phasing out when modified adjusted gross income (MAGI) exceeds $150,000 for single filers or $300,000 for married couples filing jointly, the same thresholds that apply to the no-tax-on-tips deduction.

The IRS has confirmed the income thresholds but has not yet released final guidance on the phase-out rate or the income level at which the deduction is fully eliminated.

 

Who qualifies for the no tax on overtime deduction

Workers who receive overtime pay required under US labor law qualify. This includes hourly employees entitled to overtime under the Fair Labor Standards Act (FLSA), non-exempt salaried employees who receive overtime pay, and any other workers whose overtime compensation is calculated and reported by their employer.

Important: Tips earned during overtime work cannot count toward the no tax on overtime deduction—but they can count toward the no tax on tips deduction. You cannot "double-dip" by claiming the same earnings under both deductions.?

Can you claim both no tax on tips and no tax on overtime deductions

Yes, you can claim both deductions on the same tax return if you earned both tips and overtime. The deductions are separate and have independent limits.

Example: A Bartender earning $30,000 wages, $15,000 tips, and $8,000 qualified overtime compensation can deduct $15,000 (tips) + $8,000 (overtime) = $23,000 total from taxable income.

Other Schedule 1-A deductions

Schedule 1-A also includes deductions for no tax on car loan interest and enhanced deductions for seniors. The IRS has not yet released detailed guidance on these provisions or the specific limits and phase-outs.

What are Trump Accounts

Trump Accounts are a new type of individual retirement account that parents, guardians, or other authorized individuals can establish on behalf of children under age 18.

Trump Account contribution limits

Parents or guardians can contribute up to $5,000 annually to a child's Trump Account for tax years 2026 and 2027. Starting in 2028, the contribution limit adjusts annually for inflation at 2%.

Federal government pilot program contribution

The federal government will make a one-time $1,000 contribution to the Trump Account of each eligible child who is a US citizen and born between January 1, 2025, and December 31, 2028. This pilot program contribution is automatic, parents don't need to make their own contributions to receive the government's $1,000.

When can contributions begin?

Contributions to Trump Accounts cannot be made before July 4, 2026. Parents should visit trumpaccounts.gov to learn how to establish accounts and make contributions starting July 2026.

Projected Trump Account balances

The Council of Economic Advisers projects that a Trump Account for a baby born in 2026 will grow to $303,800 by age 18 and $1,091,900 by age 28 if maximum contributions are made annually and the account earns average US stock market returns.

Even with no additional contributions beyond the government's initial $1,000, the account is projected to grow to $5,800 by age 18 and $18,100 by age 28.

What is Form 1099-DA?

Form 1099-DA (Digital Asset Proceeds From Broker Transactions) is a new tax form that digital asset brokers must issue to report cryptocurrency, NFT, and other digital asset transactions.

When does Form 1099-DA reporting begin

Form 1099-DA reporting applies to digital asset transactions occurring on or after January 1, 2025. Brokers must furnish Form 1099-DA to taxpayers and file with the IRS beginning in early 2026—meaning you'll receive Form 1099-DA for your 2025 crypto transactions when filing your 2025 tax return in 2026.

Who must issue Form 1099-DA

Digital asset brokers must issue Form 1099-DA. A digital asset broker is any person or organization that actively facilitates digital asset transactions for customers and has access to or verifies the identity of counterparties.

This includes cryptocurrency exchanges like Coinbase, Kraken, or Binance.US, payment processors handling crypto transactions, hosted wallet providers, decentralized exchange platforms that verify user identities, and NFT marketplaces facilitating sales.

What information does Form 1099-DA report

Form 1099-DA reports the proceeds from digital asset sales, the date of each transaction, a description of the digital asset sold, cost basis information (if available), and whether the gain or loss is short-term or long-term.

Each transaction is generally reported on a separate Form 1099-DA unless the broker combines transactions involving broker fees paid in the same digital asset as the underlying transaction.

Do you still report crypto if you don't receive Form 1099-DA

Yes—taxpayers must report all taxable digital asset transactions on federal tax returns even if they don't receive Form 1099-DA. Not receiving a 1099-DA doesn't mean the transaction is tax-free.

If you sold cryptocurrency, NFTs, or other digital assets during 2025, report those transactions on Form 8949 and Schedule D when filing your 2025 return.

Simple Strategies to maximize your 2026 tax filing

#1 File Schedule 1-A if you earned tips or overtime

Don't leave thousands in tax savings on the table. If you earned tips or overtime during 2025, complete Schedule 1-A and claim the deductions. Your employer already reported your tips and calculated your qualified overtime compensation on your W-2—you just need to transfer that information to Schedule 1-A.

#2 Verify your employer calculated qualified overtime compensation

Check your 2025 W-2 to confirm your employer separately reported qualified overtime compensation. Not all employers calculated this amount for 2025 since the law passed mid-year.

If your W-2 doesn't show QOC separately, contact your employer's payroll department and request a corrected W-2 showing the breakdown.

#3 Don't double-count tips earned during overtime

If you earned tips while working overtime hours, those tips count toward the no tax on tips deduction—not the no tax on overtime deduction. Only the extra wages you earned above your regular rate (the overtime premium) qualify for the overtime deduction.

#5 Check income phase-outs before claiming deductions

If your MAGI exceeds $150,000 (single) or $300,000 (joint), your no tax on tips and no tax on overtime deductions may be reduced or eliminated due to phase-outs. Calculate your MAGI first to determine whether you qualify for full deductions.

Official IRS guidance on phase-out thresholds, limits, and implementation details for new deductions is not yet published as of the current news coverage.

#6 Open a Trump Account for eligible children

If you have children under age 18, consider opening a Trump Account starting July 4, 2026. The government's $1,000 contribution plus your annual contributions can grow to over $300,000 by age 18 under average stock market returns.

Visit trumpaccounts.gov for enrollment information.

#7 Review Form 1099-DA carefully before filing

If you traded cryptocurrency or NFTs in 2025, you'll receive Form 1099-DA from your exchange or broker. Review the form carefully—confirm the proceeds, cost basis, and gain/loss calculations match your records.

If the form shows errors, contact your broker immediately to request a corrected 1099-DA before filing your return.

#8 Report all crypto transactions even without Form 1099-DA

Not all crypto transactions generate Form 1099-DA. Wallet-to-wallet transfers, decentralized exchange trades without KYC, and peer-to-peer sales may not be reported by brokers—but you're still required to report them on your tax return.

Maintain detailed records of all digital asset transactions including dates, amounts, cost basis, and fair market value at the time of each transaction.

How NSKT Global can help with your 2026 tax filing

NSKT Global provides comprehensive tax preparation and planning services for individuals navigating new tax provisions, complex deductions, and international tax obligations.

We offer 2026 tax filing services including Schedule 1-A optimization ensuring you claim all available deductions for tips, overtime, car loan interest, and senior enhancements, MAGI planning structuring your income to maximize. 

We also help you take advantage of Schedule 1-A deductions before phase-outs reduce benefits, cryptocurrency tax reporting preparing accurate Form 8949 and Schedule D reporting for digital asset transactions whether or not you received Form 1099-DA, and year-round tax planning identifying strategies to reduce your 2026 tax liability. 

Whether you're a tipped worker claiming the no tax on tips deduction for the first time, an overtime worker unsure how to calculate qualified overtime compensation, a cryptocurrency trader or a parent considering Trump Accounts for your children, NSKT Global ensures you maximize all available deductions for maximum tax benefits while maintaining compliance, and file returns electronically for fastest refund processing and lowest error rates.