Overview

• The law provides above-the-line deductions through 2028 for up to $25,000 in reported tips and $12,500 in overtime pay per individual taxpayer.
• Deductions phase out for single filers above $150,000 of income and joint filers above $300,000 and apply equally to standard and itemized filers.
• Treasury and IRS have yet to issue guidance on qualifying occupations, leaving workers and employers waiting for eligibility rules.
• Payroll taxes on tips still apply, and differing state overtime requirements could complicate how federal deductions are implemented.
• The omnibus act also expands workforce Pell Grants, boosts employer-provided childcare tax credits, and makes employer student-loan repayments permanently tax-free.