The One Big Beautiful Bill (OBBB) introduces new individual tax deductions effective from tax year 2025 through 2028. These include deductions for qualified tips received in certain occupations, qualified overtime compensation, interest paid on car loans for personal-use vehicles, and an additional deduction for individuals aged 65 and older. To support these deductions, the bill establishes new reporting requirements for employers, payors, and lenders, who must file information returns with the IRS or SSA and furnish statements to taxpayers showing relevant amounts and details such as occupation, compensation, and interest paid.
To ease the transition into these new requirements, the Department of the Treasury and the Internal Revenue Service issued Notice 2025-62, providing penalty relief for tax year 2025. Employers and other payors will not be penalized for failing to separately report cash tips, the occupation of the tip recipient, or the total amount of qualified overtime compensation, as long as they otherwise file complete and correct returns or statements. The IRS has confirmed that Forms W-2 and 1099 will not be updated to reflect OBBB-related changes for 2025, and the year will be treated as a transition period for enforcement and administration.
Although not required to receive penalty relief, employers and payors are encouraged to provide employees and payees with separate accountings of tips and overtime compensation. This information may assist individuals in claiming the new deductions and can be provided through online portals, written statements, secure methods, or, in the case of overtime, in Box 14 of Form W-2.
The IRS will publish a guidance for individual taxpayers on how to claim deductions for qualified tips and overtime compensation will be released prior to the 2025 filing season.
You can access the full IRS notice here.