2025 Tax Rules: Overtime & Tip Income
Update: 2025-12-05
Description
New tax rules for overtime and tip income in 2025 are causing confusion, with complex requirements and lack of clear paperwork. The Department of Treasury and IRS released guidance, but its still unclear when some overtime might not qualify for a tax break. Taxpayers will need to review their own records and create a simple log of their overtime hours. Employers are not required to separate qualified overtime compensation for 2025, but will have to starting in 2026. The deductions for tip income and overtime apply to both those who itemize and those who take the standard deduction, but they are below-the-line deductions and will not reduce adjusted gross income or help with other tax credits.
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