New on the books: seven changes that reach a normal paycheck this year

Most of the tax law Congress passed in July 2025 was written for the return you will file next spring, and a fair amount of it has been quietly changing paychecks and W-2s since January. Below are the seven pieces most likely to reach a household in Montgomery County, described the way the statute actually reads rather than the way the campaign slogans did. Where a number is indexed for inflation, the 2026 figure is given.

1. Tips and overtime: a deduction, not an exemption

Workers can deduct up to $25,000 of tips and up to $12,500 of overtime pay ($25,000 on a joint return) on their federal return for 2025 through 2028. Two things the slogan leaves out. First, the money is still withheld from every paycheck; the benefit shows up as a bigger refund or smaller bill in April. Second, the tips deduction is limited to occupations on a Treasury list of about seventy that customarily receive tips: servers, bartenders, salon and barber staff, delivery drivers and the like. The overtime piece applies only to overtime required by federal law, meaning hours past forty in a week. Starting with the 2026 W-2, employers report both amounts in new boxes, so a worker who has not seen them on a pay stub should ask payroll whether the tracking is turned on.

2. The extra deduction for people 65 and over

Anyone 65 or older gets an additional $6,000 deduction on top of the standard deduction, whether or not they itemize, for 2025 through 2028. It phases out above $75,000 of income for a single filer and $150,000 for a couple. A retired couple both over 65 gets $12,000 of income off the top. This replaced the campaign idea of exempting Social Security benefits outright, which did not pass.

3. Interest on a car loan

Up to $10,000 a year of interest on a loan for a new vehicle can be deducted for 2025 through 2028, provided the vehicle was assembled in the United States and is for personal use. Used cars do not count. Leases do not count. The deduction fades out above $100,000 of income for a single filer and $200,000 for a couple. The dealer's paperwork shows the final assembly point; the VIN does too.

4. The standard deduction and the child credit

For 2026 the standard deduction is $16,100 for a single filer and $32,200 for a married couple filing jointly, both permanently indexed. The child tax credit is $2,200 per child, also indexed. Roughly nine in ten households take the standard deduction, so for most families this is the line that moves.

5. Fewer 1099 forms

A business now has to send a 1099 to a contractor only if it paid that person $2,000 or more in the year. The old line was $600, and had been since 1954. Anyone who does side work will get fewer forms in January. The income is still taxable; what changed is who has to report it.

6. Texas: the homestead exemption went up

In November, Texas voters approved raising the school-district homestead exemption from $100,000 to $140,000 of a home's value, and raising the additional exemption for homeowners 65 and older or disabled from $10,000 to $60,000. Both apply to the 2025 tax year, so they showed up on the bills that went out this past fall and will again this year. The Montgomery Central Appraisal District applies them to a home that already has a homestead exemption on file; a homeowner who has never filed one has to file once.

7. Texas: a small business's equipment is largely off the tax roll

The same November ballot raised the exemption for business equipment and inventory from $2,500 to $125,000 per location, starting with the 2026 tax year. A shop's counters, printers, tools and stock under that value no longer draw county property tax. This is the one item on the list that reaches a household indirectly: every small business along FM 1488 and in Old Town Magnolia gets it, and the owner still has to file the annual rendition with the appraisal district by April 15 to claim it.

Four things to check before April

• The pay stub. Whether overtime and tips are broken out as separate lines. If they are not, the W-2 boxes cannot be filled in, and the deduction has nothing to point at.
• The occupation. Whether the job is on Treasury's tipped-occupation list. A server is; a warehouse worker who gets an occasional tip is not.
• The window sticker or title. Where a vehicle bought since January 2025 was assembled. Only U.S. final assembly qualifies for the loan-interest deduction.
• The appraisal-district notice. Whether the homestead exemption, and the 65-and-over exemption where it applies, actually appear on it. The increases apply only to homes with the exemption on file.

What did not change

Texas still has no state income tax. Sales tax is still 8.25% in Magnolia. Social Security benefits are taxed the same way they were. Nothing here changes withholding on its own; a worker who wants the tips or overtime benefit during the year rather than at filing can file a new W-4 and adjust it; the IRS's withholding estimator shows the effect before the form is signed.

Sources: the IRS's 2026 inflation adjustments and its tips and overtime guidance; the 2026 W-2 instructions; OnPay on the 1099 threshold; Ballotpedia on Texas Proposition 9 and the November 2025 homestead measures; the Texas Comptroller's property-tax exemption pages.