No Tax on Tips and Overtime
Workers in service, healthcare, and manufacturing industries stand to benefit from two new deductions:
- Tips Deduction: Up to $25,000 in reported tips can be deducted from taxable income (2025–2028).
- Overtime Deduction: Up to $12,500 in overtime pay can be deducted annually.
Eligibility Highlights:
- Available to both itemizers and standard deduction filers.
- Phases out for incomes over $150,000 (single) or $300,000 (joint).
- Applies only to tips and overtime reported on W-2s or 1099s.
Impact: A police officer earning $15,000 in overtime could shave thousands off their tax bill. A restaurant worker with $20,000 in tips may see a full refund of taxes withheld on that income.
Expanded Standard Deduction
The bill permanently enhances the standard deduction:
| Filing Status | Old Deduction | New Deduction (2025) |
| Single | $15,000 | $15,750 |
| Married Joint | $30,000 | $31,500 |
Additionally, seniors age 65+ get a bonus $6,000 deduction per person—$12,000 for married couples.
Impact: Most taxpayers—especially retirees and middle-income earners—will see lower taxable income and simpler filing.
These deductions are above-the-line, meaning they reduce AGI and can unlock other tax benefits. For clients with fluctuating income or high tip/overtime exposure, this is a prime opportunity to revisit withholding strategies and optimize quarterly estimates. Give us a call for more info/clarification, or contact your tax advisor.