A couple of the headline grabbing items in OBBBA are for tax breaks on tip income and overtime pay. These are both below the line deductions and are eligible to be utilized whether the tax payer is taking the standard deduction or itemizing.
The “No Tax on Tips” provision doesn’t eliminate taxes on tips but rather, creates a deduction on up to $25,000 of “qualified tip” income. It is notable that this is in effect from 2025 through 2028 and there is no difference in the deduction based on filing status (single vs joint). In order to qualify, there are a few conditions that must be met. These are that the taxpayer must work in a role that traditionally and customarily receives tips, the tips must be voluntary, and the tips must be earned through a Specified Service Trade or Business. This deduction also phases out when AGI exceed $150k for single filers and $300k for joint filers. Essentially this does give some taxpayers the ability to avoid taxes on some tip income as long as conditions are met and income thresholds are not breached.
The “No Tax on Overtime” provision also does not exempt overtime income from taxation but instead creates a deduction for qualified overtime income for years 2025-2028. There is a $25k possible deduction for joint filers and it is only half of that amount for single filers. It is important to note that the amount that is subject to deduction is the amount that is paid above the employer’s normal wage rate. For example, if an employer normally earns $50 per hour and then earns $60 per hour for overtime pay, only the incremental $10 would be eligible for deduction.
It is important to speak to a tax professional for advice on how these scenarios effect your individual circumstances.
https://www.irs.gov/newsroom/one-big-beautiful-bill-act-of-2025-provisions