New US Rules for 2026: Overtime Deduction, Backup Withholding and Trump Accounts

Summary

Tax year 2026 brings several new US rules that land squarely on cross-border workers and dual filers. First, the overtime pay deduction applies beginning in tax year 2026; updated IRS FAQs indicate that amounts generally may be claimed only to the extent they are reported on Form W-2, and that the deduction does not exempt overtime pay from gross income. Second, the IRS issued final regulations on backup withholding for third-party network transactions under Sec. 3406, reflecting changes made by the OBBBA. Third, proposed regulations for Trump accounts clarify a $2,500 annual limit for workers, and also address self-employed owners, Sec. 125 cafeteria-plan contributions, and employer matching of the government's $1,000 pilot contribution. For cross-border filers, these changes bear on how US-source income is reported and withheld.

Sources

• The Tax Adviser (AICPA) — IRS updates overtime deduction FAQs, adds reporting details — https://www.thetaxadviser.com/news/2026/aug/irs-updates-overtime-deduction-faqs-adds-reporting-details/
• The Tax Adviser (AICPA) — Final regs. issued for Sec. 3406 backup withholding rules — https://www.thetaxadviser.com/news/2026/aug/final-regs-issued-for-sec-3406-backup-withholding-rules/
• The Tax Adviser (AICPA) — Trump account prop. regs. clarify $2,500 limit for workers — https://www.thetaxadviser.com/news/2026/aug/trump-account-prop-regs-clarify-2500-limit-for-workers/

Our Take

Although these are US rules, they reach across the border: a Canadian resident employed in the US, or a US citizen working in Canada, can see taxable income and cash flow shift through W-2 overtime treatment, backup-withholding status, and the new savings-account framework. The overtime deduction adjusts taxable income rather than excluding the pay from gross income, so withholding and reporting must be understood separately; backup withholding turns on whether a payer must withhold at the statutory rate, which can be triggered by missing or mismatched taxpayer identification and account details. Trump accounts remain proposed, so the specifics may still change — worth watching rather than acting on early. This is general information and does not constitute tax advice; consult a licensed CPA about your own filing.

Disclaimer: This article is general information only and does not constitute tax advice; it should not substitute professional tax counsel. Please consult a licensed CPA for advice specific to your situation.