Under H.R. 1, P.L. 119-21, the law known as the One Big Beautiful Bill Act (OBBBA), new federal income tax deductions are available for qualified tips and qualified overtime compensation. These deductions are effective for tax years 2025 through 2028.
The IRS announced updated FAQs in Fact Sheet 2026-13, released Aug. 6, 2026, on the deduction for qualified overtime compensation, including eligibility, calculation limits and timing, Fair Labor Standards Act (FLSA) coverage and exemptions, reporting, withholding, recordkeeping, employer and payor