01/08/2026
📌 Key 2025 Tax Law Updates (Federal)
1. New deduction — “No tax on tips”
Workers in qualifying tipped occupations can deduct up to $25,000 in qualified tip income from federal taxable income (2025–2028) instead of paying federal income tax on it. �
IRS
2. New deduction — “No tax on overtime”
Qualifying overtime compensation (the extra portion above regular pay) can be deducted — up to $12,500 for singles / $25,000 for married filing jointly (2025–2028). �
IRS
3. Penalty relief for reporting tips/overtime
For tax year 2025 only, employers won’t be penalized if they don’t separately report qualified tips or qualified overtime amounts on W-2s/1099s — easing implementation. �
IRS
4. No changes yet to tax forms or withholding tables for 2025
For the 2025 tax year, the IRS did not update individual withholding tables or payroll forms (W-2, 1099) to reflect the above changes — those will come later. �
IRS
5. Tax rate structure and brackets remain in place
The seven federal income tax rate brackets (10%-37%) continue as structured, with inflation adjustments. �