On July 4, 2025, President Donald Trump signed the “One Big Beautiful Bill Act” (OBBB Act) into law. Among its provisions are new tax deductions for employees who earn tips and overtime. These deductions can be claimed when filing annual federal tax returns.
What This Means for Your Team:
✅ No changes to payroll calculations at this time. OMS will continue standard processing as usual.
✅ Employees can deduct up to $25,000 in qualified tips, including voluntary cash or charged tips, from their federal taxable income.
✅ The "time-and-a-half" portion of overtime pay is now deductible, up to $12,500 for individuals, or $25,000 if married filing jointly.
✅ Payroll taxes (Social Security and Medicare) still apply, but federal income tax will not be owed on these earnings up to the allowable limits.
Key Dates to Remember:
➡️ January 1, 2025 – December 31, 2028: The law is in effect
➡️ October 2, 2025: The IRS will release official guidance, including a list of qualifying job roles and reporting requirements
➡️ Tax Year 2025 (filed in 2026): First-year employees can claim these deductions
➡️ W-2s and 1099s: Updated formats will be released by the IRS
Note: Employers must still comply with all FLSA overtime rules.
This is a significant opportunity for your workforce, and OMS will continue monitoring IRS guidance to support your compliance.
Disclaimer: This material is for educational purposes only and is not intended as specific legal advice, tax, accounting, or professional consulting. It should not replace consultation with a qualified professional in your state of operation. The information provided may not reflect the latest legal developments.
