Tax Information for Employees
One Big Beautiful Bill (OBBB) Overtime / Tip Reporting for 2025
The One Big Beautiful Bill (“OBBB”) introduced two “no tax on” provisions that impact both employers and employees starting in 2025.
- “No Tax on Overtime”
Taxpayers can deduct up to $12,500 ($25,000 married filing jointly) of “qualified overtime compensation.” These deductions begin to phase out when modified adjusted gross income exceeds $150,000 ($300,000 for joint filers). - “No Tax on Tips”
Taxpayers in qualifying tipped occupations can deduct up to $12,500 ($25,000 married filing jointly) of “qualified tips” per year. This deduction also phases out when modified adjusted gross income exceeds $150,000 ($300,000 married filing jointly).
These “no tax” provisions are in effect for the 2025 – 2028 tax years.
2025 Reporting
The IRS announced there will be no changes to the 2025 W-2. However, employers will be required to provide statements to employees showing the total qualified overtime compensation for the year. For 2025, Harpers Payroll will provide a report as a personal statement for each employee to account for overtime and tips for income tax reporting.