No two changes in the One Big Beautiful Bill Act received more attention than "no tax on tips" and "no tax on overtime." Here’s a high-level overview:
No Tax on Tips
A new $25,000 deduction was created for tips starting in 2025 and ending in 2028. The deduction is reduced if your gross income exceeds $150,000 or $300,000 if married.Note:The tax on tips provision is allowed even if you take the standard deduction.
No Tax on Overtime
A new $12,500 deduction (single filers) and $25,000 (married filing jointly) was created for overtime starting in 2025 and ending in 2028.Note:Like no tax on tips, the deduction is reduced if your gross income exceeds $150,000 or $300,000 if married.
The new bill has added complexity to the tax code, so I anticipate the IRS will issue guidelines on how to interpret the updated rules later this year. Please reach out if you have any questions, and I’ll pass along any information I might have.