No Tax on Tips & Overtime© | by Juan Ojeda Jr., MSA, MBA

It's January 2026 and the "No Tax on Tips" and "No Tax on Overtime" provisions from the One Big Beautiful Bill just went into effect.

But here's the thing most people are getting wrong:

It's not "no tax." It's a deduction.

You still report the income. You still see it on your W‑2. But now you can deduct:

• Up to $25,000 of qualified tips
• Up to $12,500 of qualified overtime ($25,000 for married filing jointly)

This is based on the IRS guidance on new deductions for tips and overtime created by the One Big Beautiful Bill Act. You can read more from the IRS here: https://shorturl.at/RxS0z

Some key fine print most people miss:

→ Tips only qualify if you work in an occupation the Treasury says "customarily and regularly received tips" before December 31, 2024. There's a list.
→ Overtime only counts if it is FLSA-required (think time and a half over 40 hours). Voluntary employer bonuses for weekends or flat extra pay for meeting quotas do not count.
→ Both deductions phase out if your MAGI exceeds $150,000 ($300,000 joint).
→ Married couples must file jointly to claim either deduction.

A lot of headlines get the "no tax" soundbite wrong. The rules matter.

If you are a server, bartender, or hourly worker expecting a big tax break, talk to someone who understands the actual rules, not just the soundbite.

Have you had clients or coworkers ask about this yet? I'm curious what you're hearing out there. 

Stay aware. Ask questions. Know the difference.

Give us a call today at (888) 203-4442 to better help you and your business entity to Regulate Money, Shelter Money &pay little to NO TAXES®