The One Big Beautiful Bill Act has new rules on tax exemptions for certain overtime pay and cash tips.
ADP’s Meg Ferrero shares her insights on the new rules employers and workers need to know.
For more information, visit ADP.com/BigBeautifulBill
Transcript:
We're waiting on guidance from the IRS and the Treasury on the overtime and tip deductions as well for new overtime deductions. It's a qualified overtime deduction up to 12,500 for individuals or 25,000 for joint filers. And that deduction only applies to overtime that is required under the Fair Labor Standards Act. Generally, that's for any time worked over 40 hours in a workweek. Additionally, it only applies to the premium portion, which is deductible.
For taxes on tips, that applies to qualified cash tips up to $25,000. But it's important to keep in mind that cash tips are actually credit card charges as well, and tip sharing arrangements.
Again, we'll be waiting for guidance from Treasury on qualified occupations, and we hope to hear that in the next couple of months.
