Tax Planning

Maximizing Deductions for Tips and Overtime Under the One, Big, Beautiful Bill

Discover who qualifies and how to claim new deductions for tips and overtime introduced in 2025 by the OBBB to lower taxable income—with examples to guide you for tax years 2025-2028.

By NomadicTax Research Team · 5-8 min read

What Are the New Deductions?

The One, Big, Beautiful Bill Act (OBBBA) introduced two significant deductions for individuals in tax years 2025 through 2028:

Qualified tips deduction for tips received in occupations that customarily and regularly receive tips as of December 31, 2024. (irs.gov)
Qualified overtime compensation deduction, which allows a deduction for the “half-premium” portion of overtime pay required by the Fair Labor Standards Act (FLSA). (irs.gov)

These deductions are available whether you itemize deductions or take the standard deduction. (irs.gov)

Sources

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