[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"detail-sidebar-cat-1-en-105":3,"doc-seo-302419-105":53,"doc-detail-302419-en":126},{"code":4,"msg":5,"data":6},0,"success",[7,14,19,24,29,34,39,44,49],{"id":8,"doc_module":9,"doc_module_name":10,"category_name":11,"show_sort_weight":12,"slug":13},11,1,"Template","Presentations",90,"presentations",{"id":15,"doc_module":9,"doc_module_name":10,"category_name":16,"show_sort_weight":17,"slug":18},12,"Resumes",80,"resumes",{"id":20,"doc_module":9,"doc_module_name":10,"category_name":21,"show_sort_weight":22,"slug":23},14,"Invoices",70,"invoices",{"id":25,"doc_module":9,"doc_module_name":10,"category_name":26,"show_sort_weight":27,"slug":28},15,"Posters",60,"posters",{"id":30,"doc_module":9,"doc_module_name":10,"category_name":31,"show_sort_weight":32,"slug":33},16,"Social Media",50,"social-media",{"id":35,"doc_module":9,"doc_module_name":10,"category_name":36,"show_sort_weight":37,"slug":38},17,"Forms",40,"forms",{"id":40,"doc_module":9,"doc_module_name":10,"category_name":41,"show_sort_weight":42,"slug":43},18,"Letters",30,"letters",{"id":45,"doc_module":9,"doc_module_name":10,"category_name":46,"show_sort_weight":47,"slug":48},21,"Paper Templates",5,"papers-templates",{"id":50,"doc_module":9,"doc_module_name":10,"category_name":51,"show_sort_weight":4,"slug":52},158,"General","general-158",{"code":4,"msg":54,"data":55},"ok",{"site_id":56,"language":57,"slug":58,"title":59,"keywords":60,"description":61,"schema_data":62,"social_meta":119,"head_meta":121,"extra_data":123,"updated_unix":125},105,"en","tax-changes-for-overtime-and-tips-payroll-implications","Tax Changes for Overtime and Tips Payroll Implications","","Summarizes U.S. tax-law changes affecting employee and employer payroll reporting for qualified overtime compensation and tips for tax years 2025 through 2028. For overtime, individuals may deduct excess “time-and-a-half” pay above the regular rate, subject to annual limits and phaseouts, while FICA still applies. For tips, qualified tips from customary-tipped occupations are deductible with specified caps and phaseouts. Notes 2025 reporting remains largely unchanged and provides guidance on how employees may still claim deductions on personal returns.",{"@graph":63,"@context":118},[64,80,101],{"@type":65,"itemListElement":66},"BreadcrumbList",[67,71,74,77],{"item":68,"name":69,"@type":70,"position":9},"https://docshare.wps.com","Home","ListItem",{"item":72,"name":10,"@type":70,"position":73},"https://docshare.wps.com/template/",2,{"item":75,"name":51,"@type":70,"position":76},"https://docshare.wps.com/template/general/",3,{"item":78,"name":59,"@type":70,"position":79},"https://docshare.wps.com/template/tax-changes-for-overtime-and-tips-payroll-implications/302419/",4,{"url":78,"name":59,"@type":81,"image":82,"author":87,"headline":59,"publisher":90,"fileFormat":93,"inLanguage":57,"description":61,"dateModified":94,"datePublished":95,"encodingFormat":93,"isAccessibleForFree":96,"interactionStatistic":97},"DigitalDocument",{"url":83,"@type":84,"width":85,"height":86},"https://docshare.wps.com/thumbnails/tax-changes-for-overtime-and-tips-payroll-implications/302419.png","ImageObject",442,249,{"name":88,"@type":89},"Eden","Person",{"url":68,"name":91,"@type":92},"DocShare","Organization","application/pdf","2026-09-23","2026-09-19",true,{"@type":98,"interactionType":99,"userInteractionCount":79},"InteractionCounter",{"@type":100},"ViewAction",{"@type":102,"mainEntity":103},"FAQPage",[104,110,114],{"name":105,"@type":106,"acceptedAnswer":107},"What overtime deduction is available for tax years 2025 through 2028?","Question",{"text":108,"@type":109},"Individuals receiving qualified overtime compensation can deduct the excess pay above their regular rate, based on the “half” portion of required time-and-a-half compensation. The deduction applies to amounts reported on Form W-2, Form 1099, or other specified statements.","Answer",{"name":111,"@type":106,"acceptedAnswer":112},"What are the key limits and phaseout rules for the overtime deduction?",{"text":113,"@type":109},"The maximum annual deduction is $12,500 ($25,000 for joint filers), and it phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers). FICA taxes remain applicable.",{"name":115,"@type":106,"acceptedAnswer":116},"How do the tips deductions work for tax years 2025 through 2028?",{"text":117,"@type":109},"Employees and self-employed individuals can deduct qualified tips received in occupations customarily and regularly tipped, including voluntary cash or charged tips and tip-shared amounts. The maximum annual deduction is $25,000 for employees, with self-employed deducting up to net income from the relevant trade or business, and the deduction phases out above $150,000 ($300,000 for joint filers).","https://schema.org",{"og:url":78,"og:type":120,"og:title":59,"og:site_name":91,"og:description":61},"article",{"robots":122,"canonical":78},"index,follow",{"doc_id":124,"site_id":56},302419,1790027861,{"code":4,"msg":5,"data":127},{"doc_id":124,"user_id":128,"nickname":88,"user_avatar":129,"doc_module":9,"category_id":50,"category_name":51,"doc_title":59,"doc_description":61,"doc_content":130,"file_id":131,"file_url":132,"file_type":133,"file_size":134,"view_count":79,"is_deleted":4,"is_public":9,"is_downloadable":9,"audit_status":9,"page_count":73,"language":135,"language_code":57,"site_id":56,"html_lang":57,"table_of_contents":136,"faqs":137,"seo_title":138,"seo_description":61,"update_tm":139,"read_time":9},1374391974468,"https://ap-avatar.wpscdn.com/davatar_29158cc5080c5b710cf443261637dec0","Tax changes for overtime and tips payroll implications  \n No taxon overtime  \nFor tax years 2025 through 2028, individuals receiving qualified overtime compensation can deduct the excess pay above their regular rate—the “half”  \nportion of “time-and-a-half” compensation required by the Fair Labor Standards Act (FLSA) . This deduction applies to amounts reported on Form W-2, Form 1099, or other specified statements.  \nKey details  \n• Maximum annual deduction: $12,500 ($25,000 for joint filers)  \n• Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers)  \n• FICA taxes remain applicable  \nMany companies face challenges in calculating the FLSA premium pay, particularly in states where overtime pay exceeds time-and-a-half or for union employees. As a result, recalculations are necessary to determine the premium portion.  \n 2025 reporting for overtime  \n• Form W-2, Form 941, and other payroll return forms remain unchanged for the 2025 tax year.  \n• Federal income tax withholding tables have not been updated for 2025.  \n• Employers should continue current reporting and withholding procedures.  \nAlthough there’s no IRS requirement to report the overtime deduction on the 2025 W-2, employees will need this information for their personal tax returns. Many employers are proactively planning to provide this information to employees at year-end, ahead of the 2026 reporting requirement. Further IRS guidance is expected in November.  \n No taxon tips  \nFor tax years 2025 through 2028, employees and self-employed individuals can deduct qualified tips received in occupations listed by the IRS as customarily tipped (as of December 31, 2024) . Qualified tips include voluntary cash or charged tips from customers or through tip sharing, reported on Form W-2, Form 1099, or Form 4137.  \nKey details  \n• Maximum annual deduction: $25,000 (capped at net income from the relevant trade or business for self-employed individuals)  \n• Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers)  \nThe IRS has identified occupations that “customarily and regularly” receive tips. For tax year 2025, transition relief is provided to payers regarding the new reporting requirements. Employees can still claim the exemption on their personal tax returns, regardless of employer reporting.  \nFor additional resources on One Big Beautiful Bill (OB3), check out the employment tax insights.  \n© 2025 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. USCS036143-2A  \nContact us  \nJohn Montgomery  \nNational Employment Tax Lead Partner  \nT: 212-872-2156  \nE: [jmontgomery@kpmg.com](jmontgomery@kpmg.com)  \nManan Shah  \nPartner, Employment Tax  \nT: 404-739-5247  \nE: [mananshah@kpmg.com](mananshah@kpmg.com)  \nMindy Mayo  \nSenior Managing Director, Employment Tax  \nT: 408-367-5764  \nE: [mindymayo@kpmg.com](mindymayo@kpmg.com)  \nSome or all of the services described herein may not be permissible for KPMG audit clients and their affiliates or related entities.  \nLearn about us:   \n[kpmg.com](kpmg.com)  \nThe information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.  \n© 2025 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. USCS036143-2A","cbCaiqi9aEbfFcCH","https://ap.wps.com/l/cbCaiqi9aEbfFcCH","pdf",817261,"English","# Key details\n# 2025 reporting for overtime\n# Tips deduction (2025–2028)\n# Employer and employee takeaways","[{\"question\":\"What overtime deduction is available for tax years 2025 through 2028?\",\"answer\":\"Individuals receiving qualified overtime compensation can deduct the excess pay above their regular rate, based on the “half” portion of required time-and-a-half compensation. The deduction applies to amounts reported on Form W-2, Form 1099, or other specified statements.\"},{\"question\":\"What are the key limits and phaseout rules for the overtime deduction?\",\"answer\":\"The maximum annual deduction is $12,500 ($25,000 for joint filers), and it phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers). FICA taxes remain applicable.\"},{\"question\":\"How do the tips deductions work for tax years 2025 through 2028?\",\"answer\":\"Employees and self-employed individuals can deduct qualified tips received in occupations customarily and regularly tipped, including voluntary cash or charged tips and tip-shared amounts. The maximum annual deduction is $25,000 for employees, with self-employed deducting up to net income from the relevant trade or business, and the deduction phases out above $150,000 ($300,000 for joint filers).\"}]","Tax Changes for Overtime and Tips Payroll Implications | PDF",1789792728]