Overview

• Above-the-line deductions of up to $25,000 for tips and $12,500 for overtime apply to tax years 2025 through 2028.
• Individuals earning up to $150,000 qualify for full deductions, with relief phasing out for higher incomes.
• The law is part of a major Republican package that continues 2017 tax cuts, trims Medicaid and SNAP funding, and allocates billions for border security.
• Critics argue the temporary tax breaks disproportionately favor middle- and higher-income workers and could widen federal budget deficits.
• Treasury and the IRS are slated to issue detailed regulations this year on eligibility criteria and documentation requirements for the new deductions.