The OBBBA introduced above-the-line deductions for qualified tip income (up to $25,000) and overtime pay (up to $12,500 for individuals or $25,000 for married couples filing jointly), available for tax years 2025 through 2028.
The tip deduction applies to specific tipped occupations on a published IRS list, and the overtime deduction covers pay under the Fair Labor Standards Act. Both phase out based on modified adjusted gross income and reduce your AGI whether you itemize or take the standard deduction. If you earn tips or overtime, these deductions can lower your tax bill meaningfully.
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