July 4, 2025: the law is signed
The One Big Beautiful Bill Act (Public Law 119-21) creates the new deductions for overtime premium, tips and car loan interest, restores the 1099-K threshold, and raises the 1099-NEC and 1099-MISC threshold for later payments. The deductions apply from tax year 2025.
Tax year 2025: the transition year
The deductions can be claimed for 2025, but employers were not required to report qualified overtime or tips separately. IRS Notices 2025-62 and 2025-69 gave transition relief: for 2025, paystub records and other reasonable methods could establish the amounts.
January 1, 2026: reporting becomes mandatory
Payments for 1099-NEC and 1099-MISC purposes now count against the new $2,000 threshold. For wages, employers must report qualified overtime in W-2 Box 12 code TT, qualified tips in code TP, and the Treasury Tipped Occupation Code in Box 14b, on the W-2s issued in January 2027.
Filing seasons 2027, 2028 and 2029
The three seasons this site is built for. The 2027 season is the first with code TT and TP on W-2s, which is when reconciliation questions peak. The NEC and MISC threshold is inflation-adjusted for years after 2026.
After tax year 2028: the sunset
The overtime, tips and car loan deductions end after tax year 2028 unless Congress extends them. The 2029 filing season is the last one they can be claimed in.