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Tax Guidance for workers eligible to claim deductions for tips and for overtime compensation for tax year 2025.

cpa1dev on February 19, 2026

Notice 2025-69 PDF clarifies for workers how to determine the amount of their deduction without receiving a separate accounting from their employer for cash tips or qualified overtime on information returns such as Form W-2 or Form 1099, as those forms remain unchanged for the current tax year. It also provides transition relief to workers who receive tips in the course of a specified service trade or business.

The IRS is in the process of updating income tax forms and instructions for taxpayers to use this filing season that will assist them in claiming these deductions.

No Tax on Tips

Under the One, Big, Beautiful Bill, workers may be eligible for new deductions for tax years 2025 through 2028 if they received qualified tips. For tipped workers, the maximum annual deduction is $25,000, which phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).

It is estimated that there are about 6 million workers who report tipped wages.

Examples of how the rules work for tipped employees

Today’s guidance provides examples to illustrate various situations tipped employees might encounter; below are abridged versions of some of those examples.

Waiter with reported tips in box 7, Form W-2

Ann is a restaurant server whose 2025 Form W-2, box 7 reports $18,000 of social security tips. Ann did not report any additional tips on Form 4137. Ann may use $18,000 in determining the amount of her qualified tips for tax year 2025.

Bartender with additional reported tips on Form 4137

Bob is a bartender who reports $20,000 in tips to his employer during the 2025 tax year on Forms 4070 and reports $4,000 of unreported tips on Form 4137, line 4. Bob’s 2025 Form W-2 reports $200,000 in box 1 and $15,000 in box 7. Bob may use either the $15,000 in box 7 of the Form W-2, or the $20,000 of tips reported to Bob’s employer on Forms 4070 in determining the amount of qualified tips for tax year 2025. Regardless of the option chosen, Bob may also include the $4,000 of unreported tips from Form 4137, line 4 in determining the amount of qualified tips.

Self-employed travel guide

Doug is a self-employed travel guide who operates as a sole proprietor. In 2025, Doug receives $7,000 in tips from customers paid through a third-party settlement organization (TPSO). For tax year 2025, Doug receives a Form 1099-K from the TPSO showing $55,000 of total payments. The Form 1099-K does not separately identify the tips. However, Doug keeps a log of each tour that shows the date, customer, and tip amount received. Because Doug has daily tip logs substantiating the $7,000 tip amount, he may use the $7,000 tip amount in determining qualified tips for tax year 2025.

No Tax on Overtime

For tax years 2025 through 2028, individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay (generally, the “half” portion of “time-and-a-half” compensation) that is required by the Fair Labor Standards Act and reported on a Form W-2, Form 1099, or other specified statement furnished to the individual.

  • Maximum annual deduction is $12,500 ($25,000 for joint filers).
  • Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).

The deduction is available for both itemizing and non-itemizing taxpayers.

Certain employees are exempt from the rules on overtime

Generally, the FLSA requires that most employees in the United States be paid at least the federal minimum wage for all hours worked and overtime pay at not less than time and one-half their regular rate of pay for all hours worked over 40 in a workweek. However, the law provides for certain exemptions. We can provide examples if interested. Please let us know!

New Government Accounts jumpstart the American Dream.

cpa1dev on January 21, 2026

We’re building long-term financial security for millions of children by creating tax-advantaged investment accounts for U.S. citizens under the age of 18. Coming in July, 2026.

Get $1,000 for every American child born between January 1, 2025 and December 31, 2028.

The account is fully in your child’s name, and you are the sole custodian until they turn 18. No contributions necessary—but you can deposit up to $5,000 per year to maximize growth

Launching July 5, 2026

  • Enroll your child by making an election when you file your taxes
  • A financial institution will receive your funds and activate your account.
  • Sit back and watch the money grow. Contribute anytime (or not).

Big things  start with small steps.

Jumpstart their financial future

Build your child’s financial foundation right from the beginning. With $1,000 from the U.S. Treasury, your child has a huge head start on the American dream.

The power of time in the market

Your account balance will grow over time on its own, whether you choose to contribute additionally or not. You may contribute up to $5,000 per year to accelerate gains.

Proven winners. All-American growth.

Your child’s funds will automatically be invested in American companies. The app lets you see exactly what stocks they own and how they’re performing.

Growing their finances. And their education.

As they get older, they’ll learn about investing and watch their money compound in real time. They’ll gain more than just money. They’ll gain financial literacy.

At 18 the Trump Account is all theirs

They’re free to continue letting it grow, or they can withdraw funds right away to use for things like education or a home—with all the tax advantages of a traditional IRA.

Your child's account grows with them.

Contributing to your child's Trump Account is optional. The balance will continue to grow over time, with or without contributions.

contributing $0/year:

$5,800

Over 18 years

Contributing $250/year:

$20,700

Over 18 years

Contributing $5,000/year:

$303,800

Over 18 years

Estimates are for illustration only and are based on an account opening at birth with $1,000 opening deposit and are derived from historical S&P 500 averages. Actual results may differ and are not guaranteed.

New Tax Law Changes For 2026 Tax Returns: Tax Provisions Part 2

cpa1dev on December 16, 2025

Business Tax Provisions

Permanently restores immediate expensing for domestic research a,nd development (R&D) expenses; small businesses with gross receipts of $31 million or less can retroactively expense R&D back to after December 31, 2021; all other domestic R&D between December 21, 2021 and January 1, 2025 can accelerate remaining deductions over a one- or two-year period.

Permanently reinstates the EBITDA-based limitation on business net interest deductions.

Permanently restores 100 percent bonus depreciation for short-lived investments.

Temporarily provides 100 percent expensing of qualifying structures, with the beginning of construction occurring after January 19, 2025, and before January 19, 2029, and placed in service before January 1, 2031.

Makes the Section 199A pass-through deduction permanent; increases phase-in range of limitation by $50,000 for non-joint returns and $100,000 for joint returns.

Implements a one percent floor on deduction of charitable contributions made by corporations.

NEW TAX LAW CHANGES FOR 2026 TAX RETURNS AND THEREAFTER

cpa1dev on December 4, 2025

As the TCJA changes were set to expire at the beginning of 2026, the 2025 One Big Beautiful Bill makes many of these once-temporary changes permanent. Much of what takes effect beginning in 2026 is, a permanent continuation of the TCJA of 2017.

While there are a handful of changes that are retroactive to 2025, most of the changes in the One Big Beautiful Bill take effect on January 1, 2026. Some are permanent, while others last a few years. In addition to the tax-year 2025 retroactive changes, 2026 and thereafter tax changes include many changes, including:

AMT

Makes the increase in the alternative minimum tax (AMT) exemption permanent; reverts AMT exemption phaseout thresholds to 2018 levels of $500,000 for single filers and $1 million for joint returns, indexed for inflation thereafter; increases the phaseout rate.

Increase of Estate Tax Exemption

Permanently increases the estate and lifetime gift tax exemption to an inflation-indexed $15 million for single filers, and $30 million for joint filers, beginning in 2026.

Above the Line Charitable Contributions

Creates a permanent $1,000 above-the-line deduction for charitable contributions ($2,000 for joint filers).

Limits on the Value of Itemized Deductions

Limits the value of itemized deductions to 35 cents on the dollar for taxpayers in the top tax bracket. 0.5 percent floor on charitable contributions in order to take them as an itemized deduction.

  • Elimination of Personal and Dependent Exemptions
  • Increased Standard Deductions
  • Increased Standard Deductions
  • Current Tax Brackets
  • Increased Child Tax Credit
  • $750,000 Deductible Personal Mortgage Limit
  • Limitation on Personal Casualty Losses, Miscellaneous Itemized Deductions, and Moving Expense Deduction for Most Taxpayers
  • Increased AMT Exemption
  • Deduction for Qualified Business Income (QBI) at 20%

New Tax Law Changes For 2025 Tax Returns Part 2

cpa1dev on November 18, 2025

-Increased Child Tax Credit

Makes the expiring child tax credit permanent with an increased maximum of $2,200 in 2025, inflation adjusted thereafter.

-Increased Section 179 Limits

Expands the Section 179 expensing cap to an inflation-adjusted $2.5 million with a phasedown starting when the cost of qualifying property exceeds an inflation-adjusted $4 million; applies after Dec. 31, 2024.

-Partially Refundable Adoption Credit

-Trump Savings Accounts for Eligible Children Born Between 2025-2028 – One Time $1,000

-End of the Electric Vehicle Credit as of September 30, 2025

Additional items included in the bill mainly having an impact on businesses include:

  • Restoration of 100% Bonus Depreciation
  • Restoration of Expensing of Certain R&D Costs
  • Business Interest Deductions Moving Back to the EBITDA standard
  • 100% Expensing for Certain Manufacturing Structures (Temporary)

New Tax Law Changes For 2025 Tax Returns Part 1

cpa1dev on October 30, 2025

Most of the changes in the One Big Beautiful Bill take effect on January 1, 2026, but some are retroactive and could impact 2025 tax returns. Many of the changes have certain requirements, such as adjusted gross income limits, and some are temporary. Changes that might affect most 2025 tax returns include:

– Additional Senior Deduction

Temporarily adds a senior deduction of $6,000 for each qualifying individual for both itemizers and non-itemizers, which phases out When the modified adjusted gross income exceeds $75,000, it is available from 2025 through 2028.

– Increased State and Local Tax (SALT) Itemized Deduction

Temporarily increases the cap on the itemized deduction for state and local taxes (SALT) to $40,000 for 2025, and increases the cap by one percent each year from that level through 2029, subject to a phaseout for taxpayers with incomes above $500,000, then reduces the cap to a flat $10,000 thereafter.

– Increase in the Standard Deduction

Makes the standard deduction increase permanent with an enhancement, starting in 2025 at $31,500 for joint filers, $23,625 for head of household, and $15,750 for all other filers, inflation-adjusted thereafter.

-No Tax on Tips

Temporarily makes up to $25,000 of tip income deductible for individuals in traditionally and customarily tipped industries for tax years 2025 through 2028; deduction phases out at a 10 percent rate when adjusted gross income exceeds $150,000 ($300,000 for joint filers).

-No Tax on Overtime

Temporarily makes up to $12,500 ($25,000 for joint filers) of the premium portion of overtime compensation deductible for itemizers and non-itemizers for tax years 2025 through 2028. The deduction phases out at a 10 percent rate when adjusted gross income exceeds $150,000 ($300,000 for joint filers).

-Deduction for Interest Payments on Certain Vehicles

Temporarily makes auto loan interest deductible for itemizers and non-itemizers for new autos with final assembly in the United States for tax years 2025 through 2028; deduction limited to $10,000, and phases out a a 20 percent rate when income exceeds $100,000 for single filers and $200,000 for joint filers.

More good news to come! Al Minor, COO, L. Lopez CPA and Associates