Most tax news this season has been about the standard deduction and tip exemptions. But on February 20, 2026, the IRS released something more technical and frankly more consequential if you own a business or run a manufacturing operation. Notice 2026-16 is the official IRS roadmap for one of the most aggressive business tax breaks written into law in decades. And it arrived right in the middle of filing season.
Here is a plain-English breakdown of what this notice does, what the broader “One Big Beautiful Bill Act” gives individual taxpayers, and critically where other coverage of this law is getting the details wrong.
What Notice 2026-16 Actually Does
The notice, jointly issued by the Treasury and IRS, provides interim guidance on Section 168(n) of the tax code a brand-new provision created by the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025.
In short, Section 168(n) allows businesses to write off 100% of the cost of qualifying factory buildings, mills, and production facilities in a single year, rather than depreciating them over decades. This is called the “Qualified Production Property” (QPP) deduction, and Notice 2026-16 is the IRS telling taxpayers exactly how to apply for it.
To qualify, the property must:
- Be nonresidential real property used as part of a qualified production activity (manufacturing, refining, processing)
- Have begun construction after January 19, 2025, and before January 1, 2029
- Be placed in service in the United States before January 1, 2031
- Be elected on a timely filed return this does not happen automatically
This is not a deduction for most individuals. But if you own a small factory, a food processing operation, a vertical farm, or a recycling facility, the ability to expense an entire building in Year One is a transformational tax event.
The Four OBBBA Benefits for Individual Filers
While Notice 2026-16 is business-focused, the OBBBA contains four major breaks for working Americans filing their 2025 returns right now.
1. No Tax on Tips (Up to $25,000)
Workers in professions that customarily and regularly receive tips servers, bartenders, salon workers, valets can deduct up to $25,000 in qualified tip income from their federal taxable income. This is an above-the-line deduction, meaning it reduces your adjusted gross income before you even reach the standard deduction.
Important: Social Security and Medicare taxes still apply to tip income. The OBBBA removes the federal income tax, not FICA.
2. No Tax on Overtime (Up to $12,500 or $25,000 if Married)
Hourly workers covered under the FLSA can deduct qualified overtime pay but the cap depends on your filing status, and most articles are only reporting half the number:
- Single / Head of Household: Up to $12,500
- Married Filing Jointly: Up to $25,000
One practical note for 2025 specifically: the IRS issued Notice 2025-69 in November 2025 giving employers relief from the requirement to separately report overtime on W-2s for this first year. Do not wait for a special box on your W-2. Use your final 2025 pay stubs to calculate qualifying overtime hours and report the deduction yourself using IRS Notice 2025-69 as your methodology guide.
3. The US-Built Auto Loan Interest Deduction (Up to $10,000)
If you financed a new vehicle assembled in the United States and purchased between January 1, 2025, and December 31, 2028, you can deduct up to $10,000 in auto loan interest on your federal return.
Three requirements most coverage is glossing over:
- The car must be new, not used or leased
- Your income must be under $100,000 (Single) or $200,000 (Married Joint)
- Include the VIN on your return a VIN starting with 1, 4, or 5 confirms US assembly
4. The Senior $6,000 Inflation Bonus
If you were 65 or older by December 31, 2025, the OBBBA stacks an additional $6,000 deduction on top of your standard deduction and your existing age-based bump. For a married couple where both spouses qualify, that is $12,000 extra. The deduction phases out beginning at $75,000 modified AGI for single filers and $150,000 for married filers but does not fully disappear until $175,000 and $250,000 respectively.
OBBBA Quick Reference (Corrected)
| Benefit | Max Deduction | Who Qualifies | Key Catch |
|---|---|---|---|
| No Tax on Tips | $25,000 | Customary tipping professions | FICA still applies |
| No Tax on Overtime | $12,500 single / $25,000 MFJ | Hourly FLSA workers | Use pay stubs W-2 may not show it |
| Auto Loan Interest | $10,000/year | New, US-assembled vehicle owners | Income cap: $100k/$200k; must be new |
| Senior Bonus | $6,000/person | Age 65+, income under $175k/$250k | Phases out gradually above $75k/$150k |
| Section 168(n) QPP | 100% of cost | Manufacturers, processors, farmers | Must elect on return; construction after Jan 19, 2025 |
One Practical Warning Before You File
Tax software companies are still rolling out updates for the OBBBA worksheets. Before you hit submit, confirm your platform has been updated with the tip and overtime deduction schedules from IRS Notice 2025-69. If the software does not prompt you about tip income, overtime pay, or the auto loan deduction explicitly, check the “above-the-line deductions” section manually. These are not obscure edge cases they are among the largest tax changes for working Americans since 2017, and missing them because of a software lag is an entirely preventable mistake.
This article covers tax year 2025 provisions filed in early 2026 under the One Big Beautiful Bill Act (OBBBA), signed July 4, 2025. Always verify current guidance at IRS.gov or consult a licensed CPA before filing.
Evan Cole Editor-in-Chief | Breaking News & Public Policy
“From Washington to Wall Street, and Main Street to Hollywood—Evan Cole connects the dots.”
As the Editor-in-Chief at Newskilo, Evan leads a dynamic team of journalists dedicated to uncovering the truth behind the headlines. With over 15 years in digital media, Evan has a reputation for cutting through the noise.
While he is widely recognized for his deep analysis of U.S. fiscal policy (IRS & Stimulus), Evan’s expertise extends to global current events, corporate accountability, and cultural trends. Whether he is breaking down a complex government bill, exposing a tech giant’s failure, or analyzing the societal impact of a viral celebrity moment, Evan’s goal is simple: To tell the stories that shape our world with clarity, accuracy, and integrity.