The Hidden Deductions You're Missing for Your 2026 Taxes

Tax season 2026 brings significant changes to the deduction landscape. Many New Haven taxpayers will leave money on the table simply because they don't know these deductions exist.

The "One Big Beautiful Bill" legislation introduced several new deductions that most filers aren't aware of. Add in expanded versions of existing deductions, and you have a tax year where professional expertise makes a real difference in your refund amount.

Here's what you need to know about the hidden deductions available for your 2026 tax return.

New Deductions You Can Claim This Year!

The 2026 tax year introduced four major deductions that didn't exist in previous years. These are game-changers for specific groups of taxpayers.

Tip Income Deduction

If you work in a position that customarily and regularly receives tips, you can now deduct up to $25,000 in tip income. This applies to restaurant servers, bartenders, hairstylists, delivery drivers, and other service industry workers.

Important limitations apply:

• The deduction phases out at higher income levels
• Single filers see reductions starting at $150,000 in income
• Joint filers face phase-outs beginning at $300,000
• This deduction expires after the 2028 tax year

Document your tip income carefully. Keep daily tip logs and compare them against your W-2 Box 7 (Social Security tips) and Box 1 (wages and tips).

Overtime Pay Deduction

Workers who earn overtime can deduct a portion of that income. Single filers can deduct up to $12,500, while joint filers can claim up to $25,000.

This deduction applies to both hourly and salaried employees who receive overtime compensation. Your employer should clearly identify overtime pay on your W-2 or provide a separate statement showing overtime earnings.

Car Loan Interest Deduction

Interest paid on qualified loans for new personal-use vehicles is now deductible. This applies to loans taken out specifically to purchase new vehicles for personal transportation.

Verify the following:

• The vehicle must be new (not used)
• The loan must be for personal use
• Income limitations may apply
• Specific vehicle requirements may restrict certain luxury models

Obtain Form 1098 from your lender showing total interest paid during the tax year.

Enhanced Senior Deduction

Taxpayers age 65 or older can claim an additional $6,000 deduction ($12,000 for joint filers where both spouses qualify). This supplements the already higher standard deduction available to senior taxpayers.

Calculate your age as of December 31, 2026. If you turn 65 on January 1, 2027, you do not qualify for this deduction on your 2026 return.

Above-the-Line Deductions You Don't Need to Itemize For!

These deductions reduce your Adjusted Gross Income (AGI) regardless of whether you itemize or take the standard deduction. Many taxpayers miss these because they assume all deductions require itemization.

Above-the-Line Charitable Deduction

Starting in 2026, you can deduct up to $1,000 in cash charitable donations ($2,000 if married filing jointly) without itemizing. This represents a significant change from previous years.

Requirements:

• Donations must be cash contributions (not property or goods)
• Organizations must be qualified 501(c)(3) charities
• Obtain written acknowledgment for contributions over $250
• Keep bank records or receipts for all donations

This deduction makes charitable giving more valuable for the majority of taxpayers who claim the standard deduction.

Educator Expenses

Teachers, instructors, counselors, principals, and aides can deduct up to $300 for unreimbursed classroom supplies and professional development. This deduction applies whether you itemize or not.

Qualifying expenses include:

• Books and supplies used in the classroom
• Computer equipment and software
• Athletic supplies for physical education instructors
• COVID-19 protective items purchased for classroom use

You must work at least 900 hours during the school year in a K-12 educational institution.

Student Loan Interest

Deduct up to $2,500 in student loan interest paid during 2026. This deduction phases out at higher income levels but provides valuable relief for many borrowers.

Your loan servicer will provide Form 1098-E showing interest paid. Enter this amount on Schedule 1 (Form 1040), line 21.

Income phase-out ranges:

• Single filers: $75,000 to $90,000
• Joint filers: $155,000 to $185,000

Deductions That Require Itemizing!

If your itemized deductions exceed the standard deduction ($15,000 for single filers, $30,000 for joint filers in 2026), these additional deductions become available.

Increased SALT Deduction Cap

The state and local taxes (SALT) deduction cap has increased to $40,000 for the 2025 tax year, up from the previous $10,000 limit. This change significantly impacts New Haven residents who face both Connecticut state income taxes and local property taxes.

The SALT deduction includes:

• State and local income taxes OR sales taxes (not both)
• Real estate property taxes
• Qualified personal property taxes

Connecticut residents typically benefit more from deducting income taxes rather than sales taxes. Calculate both methods to determine which provides the larger deduction.

Mortgage Interest and PMI

Private Mortgage Insurance (PMI) returns as a deductible expense starting in 2026. Homeowners who pay PMI can deduct these premiums on Schedule A.

Your lender will provide Form 1098 showing:

• Box 1: Mortgage interest paid
• Box 4: Mortgage insurance premiums paid

PMI typically applies to mortgages where the down payment was less than 20%. Once your loan-to-value ratio drops below 80%, request PMI cancellation from your lender.

Medical and Dental Expenses

Medical and dental expenses exceeding 7.5% of your Adjusted Gross Income remain deductible for itemizers. This threshold means you must have substantial medical costs to benefit from this deduction.

Qualifying expenses include:

• Doctor and dentist fees
• Hospital and nursing care
• Prescription medications
• Medical equipment and supplies
• Health insurance premiums (if not paid pre-tax)
• Mileage for medical appointments (21 cents per mile for 2026)

Keep detailed records of all medical expenses throughout the year. Save receipts, explanation of benefits statements, and payment confirmations.

How Jose's Tax Service Finds Every Deduction You Qualify For!

Tax law complexity increases every year. The 2026 changes alone introduce four new deductions and modify several existing ones. Most taxpayers don't have time to research every deduction available.

Jose's Tax Service specializes in maximizing deductions for New Haven families and individuals. Our process includes:

Comprehensive Tax Interview

We ask specific questions designed to uncover deductions you might not know exist. Our intake process covers employment, education, homeownership, medical expenses, charitable giving, and family circumstances.

Document Review

We examine every tax document you provide, looking for deduction opportunities. W-2s, 1099s, 1098s, receipts, and statements all contain valuable information.

Standard vs. Itemized Calculation

We calculate your tax liability both ways, with the standard deduction and with itemized deductions. You pay only the lower amount.

Year-Round Tax Planning

Tax preparation isn't just a once-a-year event. We provide guidance on maximizing deductions for the current year while you still have time to take action.

Take Action Now!

The 2026 filing season runs through April 15, 2027. Early filers receive refunds faster and avoid the end-of-season rush.

Gather your documents:

• All W-2 forms from employers
• 1099 forms showing additional income
• 1098 forms for mortgage interest and student loans
• Charitable donation receipts
• Medical expense receipts
• Mileage logs for business or medical travel

Schedule your appointment with Jose's Tax Service today. Visit josestaxservice.com or call our New Haven office. We offer flexible scheduling, including evening and weekend appointments.

Don't leave money on the table. The deductions exist: you just need someone who knows where to find them.