What does the IRS really allow when it comes to tax savings on overtime pay and tips?
In this episode of Kaizen Time, Brian Bride, Director of Payroll Operations at YPD, explains how the new tax deductions for overtime and tips work under the One Big Beautiful Bill Act (2025–2028).
You’ll learn:
How the new Schedule 1A form affects 2025 tax returns
Which occupations qualify for the $25,000 tip income deduction
Why only the overtime premium (not base pay) is deductible
How the 40-hour rule limits eligibility in states like California
Why these deductions reduce taxable income, not the tax you owe
Reality check:
These deductions offer modest relief, not major refunds. Workers earning $75k–$100k with consistent overtime or substantial tips will benefit most. For everyone else, it may mean a few hundred dollars back.
If you earn significant tips or overtime, understanding these new rules now can help you stay compliant and make the most of your return.