{"id":2396,"date":"2025-11-25T10:52:56","date_gmt":"2025-11-25T15:52:56","guid":{"rendered":"https:\/\/iiicareer.com\/eng\/?p=2396"},"modified":"2025-11-24T16:01:42","modified_gmt":"2025-11-24T21:01:42","slug":"irs-issues-guidance-on-qualified-tips-and-overtime-compensation","status":"publish","type":"post","link":"https:\/\/iiicareer.com\/eng\/2025\/11\/25\/irs-issues-guidance-on-qualified-tips-and-overtime-compensation\/","title":{"rendered":"IRS Issues Guidance on Qualified Tips and Overtime Compensation"},"content":{"rendered":"
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On November 21, 2025, the Internal Revenue Service (IRS) and the US Department of the Treasury released guidance outlining how workers can calculate their tax deduction for tips and overtime pay for the 2025 tax year when their employer does not separately report the information. The guidance provides specific examples of how a tax deduction for tips or overtime pay would be determined in various scenarios with different types of payroll data available to employees.<\/p>\n\n\n\n

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Under the\u00a0One Big Beautiful Bill Act (OBBBA),\u00a0workers who customarily and regularly receive tips can deduct up to $25,000 in tips from their income subject to\u00a0federal income tax starting on January 1, 2025, through December 31, 2028. The deduction does not apply to workers earning more than $150,000 per year (for single filers) or $300,000 (for joint filers).<\/p>\n\n\n\n

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Similarly, workers can deduct up to $12,500 or $25,000, depending on their filing status, in overtime pay from their income subject to federal income tax, starting on January 1, 2025, through December 31, 2028. This deduction applies only with respect to the overtime premium required under the Fair Labor Standards Act (FLSA).<\/p>\n\n\n\n

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To enable their employees to take individual tax deductions, employers are required to report qualified overtime compensation and tips. However, the IRS granted transition relief for this reporting requirement for tax year 2025, stating that employers will not be penalized for failing to report cash tips and overtime compensation in the manner required by\u00a0OBBBA. The IRS still encourages employers to make the information available to their employees in 2025 through an online portal, additional written statements, or (in the case of overtime compensation) in Box 14 of Form W-2.<\/p>\n\n\n\n

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Ogletree Deakins:<\/em>
New IRS Guidance Pinpoints How Individuals May Take Tax Breaks for Tips and Overtime<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

On November 21, 2025, the Internal Revenue Service (IRS) and the US Department of the Treasury released guidance outlining how workers can calculate their tax deduction for tips and overtime pay for the 2025 tax year when their employer does not separately report the information. The guidance provides specific examples of how a tax deduction […]<\/p>\n","protected":false},"author":1003,"featured_media":2277,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"vkexunit_cta_each_option":"","footnotes":""},"categories":[16],"tags":[36,147,82,214,302,303],"class_list":["post-2396","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-legal","tag-36","tag-guidance","tag-irs","tag-obbba","tag-overtime","tag-tax-deduction"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/iiicareer.com\/eng\/wp-json\/wp\/v2\/posts\/2396","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/iiicareer.com\/eng\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/iiicareer.com\/eng\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/iiicareer.com\/eng\/wp-json\/wp\/v2\/users\/1003"}],"replies":[{"embeddable":true,"href":"https:\/\/iiicareer.com\/eng\/wp-json\/wp\/v2\/comments?post=2396"}],"version-history":[{"count":1,"href":"https:\/\/iiicareer.com\/eng\/wp-json\/wp\/v2\/posts\/2396\/revisions"}],"predecessor-version":[{"id":2397,"href":"https:\/\/iiicareer.com\/eng\/wp-json\/wp\/v2\/posts\/2396\/revisions\/2397"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/iiicareer.com\/eng\/wp-json\/wp\/v2\/media\/2277"}],"wp:attachment":[{"href":"https:\/\/iiicareer.com\/eng\/wp-json\/wp\/v2\/media?parent=2396"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/iiicareer.com\/eng\/wp-json\/wp\/v2\/categories?post=2396"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/iiicareer.com\/eng\/wp-json\/wp\/v2\/tags?post=2396"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}