Here’s what HIVE AI had to say about “What is new in the above-the-line deductions (e.g., tips/overtime)?”:
New deductions relevant this season
For the 2026 filing season, the main new federal deductions in this category are:
- No tax on tips: for tax years 2025 through 2028, eligible employees and self-employed individuals can deduct qualified tips, up to $25,000 per year, subject to a phaseout once modified AGI exceeds $150,000, or $300,000 on a joint return. The deduction is available whether you itemize or take the standard deduction, but married taxpayers generally must file jointly and include a valid SSN.
- No tax on overtime: for tax years 2025 through 2028, individuals can deduct qualified overtime compensation, meaning only the overtime premium above the regular rate required under the Fair Labor Standards Act. The cap is $12,500, or $25,000 on a joint return, and the deduction phases out once modified AGI exceeds $150,000, or $300,000 on a joint return. It is also available whether you itemize or take the standard deduction, and married taxpayers generally must file jointly.
Important filing-season wrinkle for 2025 returns
For 2025 reporting, the IRS said Forms W-2 and the main Forms 1099 were not changed to separately show qualified tips or qualified overtime. IRS guidance therefore explains how taxpayers can determine and claim the deduction even without separate breakout reporting from the payer.
The IRS also created Schedule 1-A for these new deduction claims this filing season.
Practical meaning
So the big change is that workers who received qualifying tips or true FLSA overtime premium pay may now get a federal deduction for 2025 returns even if they do not itemize. For overtime, it is not all overtime wages; it is only the premium portion above the regular rate.
If you want, I can also summarize the other new deductions in the same law, such as car loan interest and the enhanced senior deduction.
Sources
1 – Notice 2025-69
2 – One Big Beautiful Bill Act Sec. 70202. No tax on overtime
3 – Notice 2025-62
4 – One, Big, Beautiful Bill provisions – Individuals and workers
5 – Treasury, IRS provide guidance for individuals who received tips or overtime during tax year 2025
6 – One, Big, Beautiful Bill provisions
7 – One, Big, Beautiful Bill: How to take advantage of no tax on tips and overtime
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