In Part 1, we clarified common misconceptions about the Big Beautiful Bill. Now, let’s dive into the details: who qualifies, what the deduction limits are, and how these benefits work when filing taxes. 

Overtime Income Deduction 

• Who Qualifies?
  Nonexempt employees eligible for overtime under the Fair Labor Standards Act (FLSA) and who have a valid Social Security Number. 
• Deduction Limit:
  Up to $12,500 for individuals; $25,000 for joint filers. 
• Income Phase-Out:
  Begins at $150,000 (single) and $300,000 (joint), reducing by $100 for every $1,000 of income above these thresholds. 
• Effective Years:
  2025 through 2028. 

Tip Income Deduction 

• Who Qualifies?
  Employees in customary tipping roles. (A finalized list of qualifying roles is expected within 90 days). 
• Deduction Limit:
  Up to $25,000 of qualified tip income per individual. 
• Income Phase-Out:
  Same as overtime: phased out after $150,000 (single) or $300,000 (joint). 
• Effective Years:
  2025 through 2028. 

No Payroll Impact, Big Tax-Time Potential 

It’s important to note that these deductions do not affect paycheck amounts. Instead, they can significantly reduce tax liability when filing your annual return, a meaningful benefit for qualifying employees. Journey Payroll & HR: Making It Easier for You 

At Journey, we don’t just run payroll; we advocate for your team’s financial well-being. Our system will clearly track overtime and tip earnings, making it easy to provide accurate documentation at tax time. That means simplified filing and maximized deductions for your employees.