Overtime Pay (OT): Overtime pay is usually subject to federal income tax, just like regular wages. However, for tax years 2025 through 2028, a new law allows eligible employees to deduct up to $12,500 ($25,000 for joint filers) of the “premium” portion of their federally required overtime pay from their taxable income. This deduction is subject to income limits and only applies to overtime required under federal law, not overtime paid solely under state law or company policy
No Tax on Tips (2025–2028): A new federal law allows many employees in tipped occupations to deduct up to $25,000 of tips from their federal taxable income each year from 2025 through 2028. This means that, for most service workers, tips are effectively exempt from federal income tax during this period—if certain conditions are met. The deduction applies to voluntary tips in jobs where tipping was customary before 2025 and is subject to income limits and reporting requirements
NOTE: If your overtime is NOT listed on your 2025 W2 in box 14, please provide us with your last paystub.