The 2025 tax law created two new deductions that matter a lot in Orlando, where thousands of people work in restaurants, hotels and theme parks: one for tips and one for overtime. They apply to tax years 2025 through 2028 and are claimed on a new IRS form, Schedule 1-A.
What “no tax on tips” really means
It is a deduction, not an exemption. You still report your tips, but you can subtract up to $25,000 of qualified tips from your taxable income. The tips must come from a job where tipping is customary — servers, bartenders, valets, hairstylists, delivery drivers and similar jobs on the IRS list.
Important: the deduction lowers your income tax. Social Security and Medicare are still due on those tips.
What “no tax on overtime” really means
You can deduct the extra half of time-and-a-half — the premium part of overtime required by federal law — up to $12,500, or $25,000 if married filing jointly. The regular part of your overtime pay is still taxed as usual.
Who qualifies
- You need a Social Security number valid for work.
- If you are married, you generally must file a joint return.
- Both deductions shrink once your income passes $150,000 ($300,000 for joint returns).
- If you are self-employed and receive tips, the deduction can’t be larger than the net profit of that work.
Why it’s worth having it reviewed
The form is new, it has income limits and conditions, and tips or overtime are not always shown clearly on a W-2. Claiming it when you don’t qualify is as wrong as skipping it when you do. Bring your W-2, your final pay stub of the year and any tip records, and we will check it with you at no extra charge — applying exactly what the law says.