October brought several important clarifications to the One Big Beautiful Bill (OBBB), especially around tax deductions and employer responsibilities.
No Tax on Tips
The IRS released guidance on the new “No Tax on Tips” provision, including a list of occupations that qualify for the deduction. We wrote about this in a recent article. It’s important that employees and employers understand who can benefit and how to report tips accurately. Let us know if you’d like a copy of that article by emailing us at connect@kopsaotte.com. Transition relief for tax year 2025 allows time to adjust to these new requirements without penalty.
Qualified Overtime Deduction
Employers received additional direction regarding the Qualified Overtime Deduction. The IRS clarified that the “premium” portion of overtime pay—typically the extra half in “time-and-a-half”—must be reported separately. A new Box 12 code
“TT” will appear on the 2026 Form W-2 to capture this data. For 2025, employers may use reasonable methods to estimate and report these amounts, with transition relief in place to ease the burden of compliance.
Reporting responsibilities for employers have expanded under OBBB.
- Businesses must now track qualified overtime pay distinctly from other compensation
- Businesses must provide employees with statements detailing their total qualified overtime earnings.
- Payroll systems will need updates to accommodate these changes, and the IRS has emphasized the importance of accurate reporting to ensure employees can claim their deductions properly
Several Other Tax Provisions
Beyond employer reporting, several broader tax provisions were clarified. For example:
- The standard deduction has been permanently increased to $31,500 for joint filers.
- The SALT deduction cap was raised to $40,000.
- Bonus depreciation remains at 100%, and Section 179 expensing now allows up to $2.5 million.
- Interest on qualified passenger vehicle loans is now deductible.
All these provisions offer more relief to everyday taxpayers. These updates reflect OBBB’s continued effort to simplify and expand tax benefits for working Americans.