New Federal Deductions for Qualified Overtime and Qualified Tips – How ADP Will Support You for Tax Years 2026 to 2028

As we previously reported, H.R.1, the One Big Beautiful Bill Act (the Act), was signed into law on July 4, 2025. The Act includes a federal income tax deduction for qualified overtime and qualified tips, effective for tax years 2025 through 2028.

For tax years 2026 through 2028, employers and payors are expected to report qualified overtime and qualified tip amounts on year-end informational tax returns. While overtime and tip information will be accumulated throughout the year, this is an annual requirement to report qualified amounts to your employees.

Washington 2026 Overtime Salary Threshold Announced

The Washington Department of Labor & Industries (WDOL) has announced an increase to the state’s white collar overtime exemption salary threshold.

Pennsylvania Strengthens Hairstyle Non-Discrimination Protections

Pennsylvania has enacted legislation that expands the definition of race to include traits historically associated with race, including hair texture, protective hairstyles, and religious creed.

New York City Adds Pay Data Reporting Requirement

New York City will require covered employers to report pay and demographic data annually. The city will also conduct an annual pay equity study.

New Jersey - Reminder: New Jersey Employers Must Report All Separations Electronically

New Jersey employers must report all worker separation information directly to the New Jersey Department of Labor electronically through the Employer Access portal.

New Hampshire Adds Employee Protections for Military Spouses

New Hampshire employees whose military service member spouses are involuntarily mobilized for duty will be entitled to employment protections and job-protected leave.

Nevada Aligns With Portal-to-Portal Act and Clarifies Weekly Overtime Calculations

Nevada has passed legislation that expressly incorporates key provisions of the federal Portal-to-Portal Act into state law and clarifies weekly overtime calculations.

Minnesota - St. Paul, Minnesota, Amends Paid Sick Leave Ordinance

St. Paul, Minnesota has enacted changes to its sick leave ordinance. Many of the changes are intended to align city requirements with amended state requirements.

California Raises Minimum Pay for Overtime Exemptions for 2026

The California Department of Industrial Relations has announced an increase in the pay rates that computer software employees, physicians and Administrative, Professional, and Executive Employees must receive in order to be exempt from overtime pay. v

Treasury, IRS Provide Guidance for Tax Year 2025 for Individuals Claiming Deductions for Qualified Overtime and Qualified Tips

The Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) issued Notice 2025-69 (Notice 2025-69 or the Notice) on Nov. 21, 2025. The Notice offers guidance to individuals for claiming deductions for qualified overtime and qualified tips for tax year 2025. This guidance applies to new deductions for overtime and tips included in H.R. 1, The One Big Beautiful Bill Act (the Act), which was signed into law on July 4, 2025. Review the details here.

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