The One Big Beautiful Bill Act created new tax exemptions for qualified tips and qualified overtime pay, both of which take effect for 2025. There’s been a lot of administrative guidance on these provisions since July, it’s not a surprise that implementing these individual tax benefits has proven challenging—and may create significant confusion for individual filers in the spring, including on their state income tax returns.

In Notice 2025-69, the IRS suspended the specified service trade or business (SSTB) limitation for “no tax on tips” until the calendar year following final regulations on the scope of the provision. Politico has more, with related commentary—including an update on the intersection of labor law and the tax exemption for overtime—below the fold.

Treasury and the IRS appear open to revisiting the scope of the SSTB limitation for “no tax on tips,” notwithstanding a direct statutory connection to the term’s definition under § 199A. For now, however, the IRS has effectively suspended the SSTB limitation for employees until the calendar year following final regulations on the scope of the provision.

Bernie Becker, Working Through That Guidance, Politico (Nov. 24, 2025) (quoting Miles Johnson at NYU’s Tax Law Center):

Lawyers, doctors and stock brokers are among the professions designated as an SSTB . . . . So are musicians and dancers, if you’re talking about professions more likely to collect tips.

But then came the latest set of guidance from the Trump administration on “no tax on tips” . . . . Treasury and the IRS said that those workers [specifically, employees of an SSTB] will be allowed to claim the deduction until the year after regulations are finalized outlining what businesses are an SSTB under “no tax on tips.” That means that next year’s filing season might not be the only time that SSTB workers benefit from the tip deduction.

Before Friday’s guidance, even critics of the Trump administration and skeptics of the tip deduction had said that Treasury and the IRS had been faithfully implementing the provision as written by Republicans, including when it came to those SSTB professions.

But no more . . . .

Kate Dore, IRS Releases Guidance for Trump’s Tips, Overtime Deductions. What Workers Need to Know, CNBC (Nov. 25, 2025):

SSTB workers are excluded from claiming the new tip deduction under Trump’s “big beautiful bill.” But these workers may briefly be eligible for the tip deduction until the Treasury Department and IRS finalize regulations.

“I don’t want people to think that this new waiver is the permanent provision or a permanent guidance,” [said Thomas] Gorczynski[, a Tempe, Arizona-based enrolled agent].

It’s a “temporary waiver” for some SSTB workers to claim the tip deduction for 2025, he said. But there could be an “unhappy surprise” in 2026 and future years if eligibility goes away.

There’s additional complexity—and uncertainty—for the tax exemption for overtime pay. The Trump Administration currently is reconsidering Biden-era guidance on which employees are eligible for federal overtime pay, and this regulatory effort faces competing political pressures to maintain and contract the Biden-era guidance. For now, employees who do not receive specific information reporting from their employers must make a “reasonable effort” to determine their eligibility for this tax exemption and calculate the amount of their exemption under various presumptions. This guidance may result in overclaiming of the exemption for 2025.

Parker Purifoy, Millions Miss Out on Overtime Tax Breaks Under Trump Labor Rules, Bloomberg Law (Nov. 25, 2025):

Roughly 4 million “white collar” workers will lose out on a new tax exemption for overtime pay while Biden-era rules that expanded that pool of eligible employees remain in legal limbo and the Trump administration gears up to replace them.

The tax code change places pressure on the US Labor Department to craft regulations that would widen the impact of one of President Donald Trump’s signature campaign promises, some employment law stakeholders said.

It also could spur new wage-and-hour lawsuits from employees arguing they qualify for overtime under the Fair Labor Standards Act. If they succeed in court—a challenging, fact-specific, and often slow endeavor—more workers would be able to claim thousands in deductions in their annual tax returns. . . .

“[The OBBBA] is a tax bill that has wage and hour implications,” Seyfarth Shaw’s [Noah] Finkel said. “It’s using some wage and hour concepts, some labor ideas, but how it’s actually implemented remains to be seen.”

Previous TaxProf Blog coverage:

• Aprill: Rejecting Pro-Taxpayer Regulations Under Loper Bright (Aug. 20, 2025)
• Galle & Shay: Admin Law and the Crisis of Tax Administration (Dec. 14, 2023)

Other related coverage:

• Miles McClearn et al. (Tax Law Center), Comment on Proposed Regulations Implementing the Section 224 Tips Deduction (Oct. 24, 2025)
• Sloan G. Speck (Colorado), Op-Ed, How to Design a Tax Exemption for Tips That Is Workable and Fair, The Hill (Oct. 22, 2024)