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IRS Explains How You Can Claim Your 2025 Tips And Overtime Deductions
New IRS rules allow eligible workers to deduct up to $25,000 in tips and $15,000 in overtime pay on 2025 federal tax returns under the One Big Beautiful Bill Act.
- On Friday, the Internal Revenue Service and U.S. Department of the Treasury released detailed guidance on deductions tied to tips and overtime for tax year 2025, reported on new Schedule 1-A.
- The One Big Beautiful Bill Act created the temporary deductions with income limits for single filers up to $150,000 and joint filers up to $300,000, expiring in four years.
- To substantiate claims, taxpayers may use Forms W-2, 1099 or Form 4137 and contemporaneous logs; tipped workers may claim up to $25,000 and overtime deductions cover only the FLSA 'half' premium with divide-by-three examples.
- An estimated 6 million Americans could benefit, with middle-income households gaining about $800 to $1,200, according to IRS estimates.
- Employers and payors are given temporary relief from separate reporting and penalties for 2025, while the Treasury Department plans proposed regulations with public comment and offers SSTB transition relief.
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IRS Issues Calculation Clarifications Regarding Tips, Overtime Pay
The Department of the Treasury and the Internal Revenue Service (IRS) issued guidance detailing how employees can calculate tax deduction amounts applicable to tips and overtime pay when submitting federal returns, the IRS said in a Nov. 21 statement. The agency is in the process of updating income tax forms after President Donald Trump signed into law the One Big Beautiful Bill Act in July, which gave taxpayers certain provisions to claim such …
·New York, United States
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Coverage Details
Total News Sources11
Leaning Left1Leaning Right3Center3Last UpdatedBias Distribution43% Center, 43% Right
Bias Distribution
- 43% of the sources are Center, 43% of the sources lean Right
43% Right
14%
C 43%
R 43%
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