Under the OBBBA, workers can deduct up to $25,000 in qualified tips and $12,500 in qualified overtime ($25,000 joint) for tax years 2025-2028, phasing out above $150k/$300k income. IRS guidance (IR-2025-114, Nov 21, 2025; Notice 2025-69) explains the mechanics; employers must track and report these amounts so staff can claim them.
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No-tax-on-tips and overtime deductions in effect for 2026; employers must report
Why this matters for founders
Founders with tipped or hourly-overtime staff (food & beverage, local services) must separately track qualified tips and overtime in payroll so employees can claim the deductions.
Source: Internal Revenue Service
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