The IRS recently issued guidance for workers eligible to claim the temporary deductions for tip and overtime compensation for tax year 2025.
Notice 2025-69 clarifies how workers can determine the deduction amount without receiving a separate accounting from their employer for cash tips or qualified overtime on information returns such as Form W-2, Wage and Tax Statement, or a Form 1099.
The provisions on tip and overtime compensation were enacted as part of H.R. 1, commonly known as the One Big Beautiful Bill Act. For tipped workers, the maximum annual deduction is $25,000, which phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).
The IRS said it is in the process of updating income tax forms and instructions for taxpayers to use this filing season that will assist them in claiming these deductions. Read more.