The IRS issued guidance for workers eligible to claim the temporary deductions for tip and overtime compensation for tax year 2025 and is updating some income tax forms and instructions to help taxpayers claim the deductions.
Notice 2025-69, clarifies how workers can determine the deduction amount without receiving a separate accounting from their employer for cash tips or qualified overtime on information returns such as Form W-2, Wage and Tax Statement, or a Form 1099.
H.R. 1 provisions - The provisions on tip and overtime compensation were enacted as part of H.R. 1, P.L. 119-21, commonly known as the One Big Beautiful Bill Act. For tipped workers, the maximum annual deduction is $25,000, which phases out for taxpayers with modified adjusted gross income (AGI) over $150,000 ($300,000 for joint filers).
For those who receive qualified overtime, the maximum annual deduction is $12,500 ($25,000 for joint filers). The deduction phases out for taxpayers with modified AGI over $150,000 ($300,000 for joint filers).
Please click here to read the full article in the Journal of Accountancy by Martha Waggoner.
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