About the deduction engine

Why can't a single-deduction calculator answer this?

Because all four deductions phase out against the same income figure. Schedule 1-A computes modified adjusted gross income once, at line 3, and Parts II through V each read that one number — so a single raise can shrink the tips deduction, the overtime deduction, the senior deduction and the car-loan deduction at the same time. A calculator that models one of them sees a gentle slope where a household with three of them is on a cliff.

The deductions do not reduce MAGI themselves, which is what makes the interaction sharp rather than self-correcting. They sit below the line: Form 1040 reaches AGI at line 11a, and the Schedule 1-A total lands at line 13b, after it. So no deduction can soften another's phase-out, and the engine reports the marginal effect of the next $1,000 of income rather than only the level.

Which rules does it encode?

Four deductions, each from the statute that created it in P.L. 119-21, with Schedule 1-A (Form 1040) as the computation of record.

• Qualified tips — IRC § 224, added by § 70201. A $25,000 cap per return regardless of filing status, reduced by $100 for each full $1,000 of MAGI over $150,000 single or $300,000 joint. Requires a qualified occupation and a joint return if you are married.
• Qualified overtime — IRC § 225, added by § 70202. Only the FLSA premium qualifies: the “half” of time-and-a-half, not the whole overtime paycheque. Capped at $12,500 single and $25,000 joint, with the same $100 per $1,000 phase-out.
• Seniors — IRC § 151(d)(5)(C), added by § 70103. It lives in the personal-exemption section rather than § 63, which is why it is easy to miss. $6,000 for each person who reaches 65 before the year ends, reduced by 6% of MAGI over $75,000 single or $150,000 joint.
• Car-loan interest — IRC § 163(h)(4), added by § 70203. Up to $10,000 of interest on a first-lien loan for a new personal-use vehicle assembled in the United States, reduced by $200 for each $1,000 over $100,000 or $200,000.

Two supporting tables come from separate sources. The 2026 brackets and standard deduction are the published inflation-adjusted figures, and the qualified-occupation list holds all 71 Treasury Tipped Occupation Codes across 8 categories. The list is browsable. The job titles listed under each code are illustrative examples, and the final regulation states they are not exhaustive — so a title the search does not match is not a disqualification.

Why do the three phase-outs round differently?

Because the statutes differ, and harmonising them would be a bug. For tips and overtime, Schedule 1-A lines 11 and 19 say to decrease a fractional step to the next lower whole number, and neither § 224 nor § 225 contains the words “or portion thereof”. For car-loan interest, § 163(h)(4)(C)(ii)(I) does contain them, and line 28 says to increase a fraction to the next higher whole number.

So an identical $3,500 of excess income produces 3 steps under the tips rule and 4 under the car-loan rule. The engine holds the two conventions in separate rule files, and a regression test asserts they stay apart — it is the kind of asymmetry a tidy-minded refactor deletes.

What does it deliberately not model?

MAGI is an approximation. The engine builds it from wages, other income, tips and gross overtime, with no subtraction term — where the statutory figure is AGI, which is gross income less above-the-line adjustments such as HSA and traditional IRA contributions, deductible self-employment tax, self-employed health insurance and student-loan interest. The result overstates MAGI for anyone who has those, which can understate a deduction near a phase-out edge. It is a stated v1 limit, not an accident.

Four things are absent outright. The long-standing extra standard deduction for people 65 and over is not modelled, and it stacks with the $6,000 senior deduction rather than replacing it, so a senior household's total deduction here is understated. Several car-loan eligibility conditions — the gross vehicle weight limit, the first-lien requirement, the exclusions for leases, fleet sales, salvage vehicles and related-party loans, the refinancing cap and the VIN reporting requirement — are described but not enforced by the engine, so it will not stop you claiming a vehicle that does not qualify. Credits and itemised deductions are out of scope. State income tax is not modelled at all.

One thing is worth stating plainly because the popular framing gets it wrong: these are federal income tax deductions. Tips and overtime remain subject to Social Security and Medicare tax, and may be taxed by your state. “No tax on tips” does not mean tax-free tips.

What is the verification state of this section?

All six rule sets still read unverified, and that is the launch gate. A primary-source pass on 15 Aug 2026 read the enrolled public law, the 2026 inflation-adjustment revenue procedure, the tips final regulation, Schedule 1-A and its instructions, and the official occupation list — and confirmed the great majority of encoded values against them. What has not happened is the follow-through: the citation entries inside the rule files still point at placeholder addresses rather than the documents actually read, so the files cannot honestly be flipped to verified yet.

One question is unresolved outright rather than merely outstanding. No source states a sub-dollar rounding convention for these four computations. Schedule 1-A prescribes the $1,000-step rounding and the 6% senior multiplication, but says nothing about cents. The engine works in integer cents and rounds half-up, which is defensible and is not something the IRS has stated; it can move a result by about a dollar.

That pass also found real defects, which is the argument for running it. Two of them moved money: the tips and overtime phase-outs were rounding the $1,000 step the wrong way, understating those deductions, and a joint return with two spouses over 65 was over-credited — at $200,000 of MAGI the engine returned $9,000 where the form produces $6,000. Both were corrected and are now covered by regression tests.

How should you use it?

Use it to find out which of the four deductions your household is even in range for, and which one a change in income would cost you. Every figure opens its own formula and rule version, so you can check the arithmetic rather than trust it. Take the result to whoever prepares your return.

Do not use it to file. It is not tax advice, it does not know your above-the-line adjustments, and it cannot see the W-2 boxes your employer will actually report. Your inputs never leave your browser: there are no accounts, no uploads and no database, and state persists only in your own localStorage. Found something wrong? Write to info@bracketsight.com.