Frequently Asked Questions

Both deductions are available for tax years 2025 through 2028. After December 31, 2028, these deductions expire unless Congress extends them. You'll claim the 2025 deduction when you file in early 2026, and so on.

The maximum deduction for qualified overtime compensation is $12,500 per return for single/head of household filers, or $25,000 for married filing jointly. However, this is reduced if your Modified Adjusted Gross Income (MAGI) exceeds $150,000 ($300,000 for joint filers).

The maximum deduction for qualified tips is $25,000 per return, regardless of filing status. Like the overtime deduction, this is reduced if your MAGI exceeds $150,000 ($300,000 for joint filers).

Only the premium portion of overtime pay—the extra 'half' in time-and-a-half—qualifies. If you earn $30/hour for overtime (1.5× your $20 regular rate), only the $10 premium portion is qualified overtime compensation. The overtime must also be required under the Fair Labor Standards Act (FLSA), not just paid voluntarily by your employer or required by state law alone.

It depends on whether you're 'exempt' or 'non-exempt' under the FLSA. Most salaried employees in executive, administrative, or professional roles are exempt and do not qualify. However, some salaried workers are non-exempt and entitled to FLSA overtime. Check with your employer or HR department to confirm your FLSA classification.

The IRS has published a list of 70+ occupations that customarily received tips before December 31, 2024. These include servers, bartenders, barbers, rideshare drivers, hotel workers, casino dealers, delivery drivers, and many more. See our full list on the Tips Calculator page or in the Treasury Regulations (TD 10044).

No. Automatic gratuities, mandatory service charges, and other compulsory amounts do not qualify. Tips must be voluntary—paid by the customer without compulsion, where the customer determines the amount. If a restaurant adds an 18% gratuity for large parties, that is not a qualified tip.

Unfortunately, no. Workers employed by 'Specified Service Trades or Businesses' (SSTB) cannot claim the tips deduction, even if they work in an otherwise qualifying occupation (like a cafeteria server). SSTBs include health, law, accounting, financial services, consulting, athletics, and performing arts.

Both deductions are reduced by $100 for each $1,000 your MAGI exceeds the threshold. For single/HOH filers, the threshold is $150,000. For joint filers, it's $300,000. For example, if you're single with $175,000 MAGI, your deduction is reduced by $2,500 (25 × $100). The deduction is fully phased out when your MAGI is high enough that the reduction equals or exceeds your capped deduction.

No! Both deductions are 'above-the-line' deductions, meaning they reduce your Adjusted Gross Income (AGI) whether you itemize or take the standard deduction. You claim them on Schedule 1-A, attached to your Form 1040.

For tax year 2025, employers had transition relief and weren't required to report separately. Starting in 2026, employers must report qualified overtime in Box 12 (Code TT) and qualified tips in Box 12 (Code TP). If your employer fails to report correctly, request a corrected W-2c. You cannot claim amounts not reported on your W-2.

Yes! If you qualify for both, you can claim both deductions. They have separate caps, so a joint filer could potentially deduct up to $25,000 in overtime and $25,000 in tips for a total of $50,000. Just make sure the same income isn't counted twice—tips and overtime wages should be separate amounts.

No. Both statutes explicitly require married taxpayers to file a joint return to claim the deduction. If you file Married Filing Separately, you cannot claim either deduction.

For tips: Yes, if you work in a qualifying occupation and receive qualified tips, you can claim the deduction. Your tips must be reported on a 1099 or Form 4137. However, your deduction cannot exceed your net income from that trade or business. For overtime: Generally no, because the overtime deduction requires FLSA overtime, which typically applies to employees, not independent contractors.

It depends on your state. States with 'rolling conformity' to federal tax law automatically adopt these deductions. States with 'fixed-date conformity' may need to pass legislation. Some states (like California and New York) do not conform and will require you to add back the deduction on your state return. See our State Conformity guide for details.

Keep all W-2s and 1099s, pay stubs showing overtime hours and rates, daily tip logs, any W-2c corrections, and a copy of your filed return with Schedule 1-A. Retain these records for at least 3 years after filing.