Effective the tax year starting January 1, 2025…
If you received Tipped Income:
Employees who customarily and regularly receive tips may be able to deduct up to $25,000 in tips from their income subject to federal income tax, and businesses must report these tips on Form W-2 for employees and on Form 1099 for non-employees.
If you received tip income as an employee, your W-2 should provide the necessary information for your tax return.
If you received tip income as a self-employed individual, you will need to separate out the tip income from the total. This information should come from contemporaneous records such as a daily tip log or point-of-sale system reports.
If you received Overtime Pay:
Workers may also deduct up to $12,500 in qualified overtime pay from their income on their tax return. Qualified overtime compensation is defined as “overtime compensation paid to an individual that is in excess of the regular rate. Workers can deduct $12,500 ($25,000 in the case of a joint return) in overtime pay from their income subject to federal income tax. This deduction also has no efect on Social Security and Medicare taxes.
Employers are not likely to report the total amount of qualified overtime compensation on their employees’ 2025 Forms W-2. Because of the mid-year adoption of the tax bill, the IRS is not requiring this W-2 reporting by employers for 2025.
If you received overtime pay in 2025, please provide your tax preparer with your final 2025 pay stub.
Link to Printable PDF: Tips and Overtime Pay in 2025
IMPORTANT DISCLOSURES
ERB FINANCIAL offers Securities and Investment Advisory Services through Ashton Thomas Securities, LLC, member FINRA/SIPC,200 Canal View Blvd Rochester NY 14623 585-424-1234
Locally owned and operated since 1953
Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
This communication is strictly intended for individuals residing in the state(s) of NY. No offers may be made or accepted from any resident outside the specific states referenced.
Prepared by Broadridge Advisor Solutions Copyright 2026.
