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New Tax Deductions for Tips and Overtime: What Workers Need to Know for 2025

ARTICLE | February 17, 2026

Authored by Vasquez + Company

If you earn tips or overtime pay, the tax landscape just changed in your favor. The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, introduced new federal income tax deductions for qualified tip income and overtime pay, both retroactive to January 1, 2025. Eligible workers may be able to offset up to $25,000 in tip income and up to $12,500 in overtime income on their 2025 returns. But claiming these deductions is not as straightforward as it sounds. Eligibility rules, income phaseouts, reporting requirements, and the absence of updated IRS forms all mean that working with a knowledgeable tax advisor is essential to getting it right.

Read the full article here.

 

Our firm provides the information for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. This article is not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.  

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