The recent passage of this act has had a significant impact on employers. Some of the provisions relate to tax on specific types of income, including tips and overtime. Explore the law and how it may impact your employees, as well as how WorkforceHub can support compliance with the changes.
One Big Beautiful Bill Act: An Overview
H.R.1 was signed into law in July of 2025. Also referred to as the “One Big Beautiful Bill Act” or OBBBA, this piece of legislation made significant changes to federal taxes, deductions, and credits.
Tipped employees now face fewer tax requirements on a portion of their income. The deduction for tips is capped at $25,000 per year, and only cash tips and tips reported to employers qualify. The IRS published a list of occupations that customarily receive tips, so the provision applies to those working in these roles.
Additionally, taxes are reduced on overtime pay. The deduction has a cap of $12,500 (for individuals) / $25,000 (filing jointly). It is limited to the premium portion of OT pay, or the additional amount exceeding the regular hourly rate as required under the FLSA. If a person’s MAGI exceeds $150,000 (or $300,000 for couples filing jointly), the deduction is lower.
How WorkforceHub Supports the Requirements
To support employers managing the requirements associated with OBBBA, specifically the no tax on overtime provision, a new purpose-built report was released in early January of 2026. This report in WorkforceHub summarizes FLSA overtime hours and eligible overtime premiums. It is designed to provide documentation and supporting detail for employers in calculating these numbers for employees.
This report applies a federal 40-hour per week standard. It evaluates overtime-eligible punch categories, ignoring site-specific OT rules and alternative thresholds.
The provision around no tax on overtime applies to tax years 2025, 2026, 2027, and 2028. The deduction applies only to non-exempt employees who meet the classification standards under the FLSA. It covers the statutorily required OT premium for hours accrued over 40 in a week.
Some deduction caps and phase-outs exist, which are not handled in this specific report.
The report can be exported to CSV format. It can include employee names and codes, overtime hours worked, overtime pay rates, date range, and the name of the company.
It’s important to note that WorkforceHub tracks hours worked through its timekeeping module. All wages paid and W-2 totals remain within the payroll system, and employers must verify totals before moving forward.
Managing the regulations under this legislation is easier with WorkforceHub. If you’re not already using the time and labor platform, now is the time to get started. Schedule a demo and see the features in action.
