Millions of U.S. workers who earn tips and overtime pay may be eligible for a federal tax break when they file their 2025 income taxes next year.
But which workers will qualify for the new deductions is among the details the government has to work out after President Donald Trump's signature spending and policy package won final congressional approval.
Under the bill Trump signed into law on July 4, the U.S. Treasury Department must publish a list by Oct. 2 of occupations that qualify for tax-free tips. The department is also expected to publish guidance on how to report tips and overtime pay, and what documentation will be required.
The deduction provisions are not permanent but were written to expire after the 2028 tax year.
Overtime pay isn't currently separated out on an employee's W-2 tax form, for example, but employers generally keep track of it and itemize it on employees' pay stubs, said Miguel Burgos, a certified public accountant with TurboTax.
Employers should continue to withhold taxes while waiting for guidance, Burgos said. The bill doesn't apply to state and local taxes or to federal payroll taxes, which help fund Social Security and Medicare.
Here's what we know about tax-free tips and overtime:
Who is expected to qualify for tax-free tips?