Tips and Overtime Exclusion

Forum|Forum|10 months ago
August 6, 2025
1 reply
1 view

Can you explain the mechanics for excluding income from tips and overtime pay? Will I be required to enter my income from tips and overtime pay into Turbo Tax? How will Turbo Tax deduct my tips and overtime pay from my tax return? Will this deduction be done before or after my Adjusted Gross Income (AGI)?

Reason for this question is AGI is used by Social Security to determine how much IRMA I must pay for my Medicare Part B and Part D.

Many thanks for your response.

Ask the Experts - Beautiful - Aug 2025

Cindy4 12

Employee Tax Expert

The tips and overtime portion of the bill are not exclusions, but deductions that will reduce your taxable income. The IRS is working on the list of occupations that will receive the tips deduction and the forms that will be used as a reporting mechanism for both employers and employees for both the tips and overtime deductions.

The tips that can be included for the deduction are voluntary tips, not mandatory tips included as service charges as is sometimes common in restaurants when serving large parties.

The overtime will be the overtime requited by the Fair Labor Standards Act, not state overtime, or overtime required by a contract.

The deductions only affect federal income tax, not social security or Medicare. The employer will separately report qualified tips and qualified overtime on your W-2.

Please try a custom scenario in our Tax Reform Calculator.

You can also stay up to date on our One Big Beautiful Bill page.

Thanks for joining us today!

Cindy

**Please say "Thanks" by clicking the thumbs up icon in a post. ***Mark the post that answers your question by clicking on the "Mark as Best Answer"