OBBBA - Week 4: When to Start Planning for the OBBBA Tax Breaks

By now you’ve probably heard the headlines: the One Big Beautiful Bill Act (OBBBA) means new tax breaks for overtime and tips. But here’s the million-dollar question:

When should you start planning to actually use them?

The Effective Dates

Overtime Deduction — Effective tax year 2025 through 2028

Tips Deduction — Effective tax year 2025 through 2028

Up to $12,500 (single)

Up to $25,000 (married filing jointly)

Income limits apply before phaseout

$150,000 single

$300,000 married/joint

That means any overtime or tips earned this year (2025) already count. You won’t see the benefit until you file taxes in 2026 — but it’s not too early to start planning.

Steps to Take Now

1. Track Your Overtime and Tips

Keep your own records — don’t just rely on your employer’s pay stubs.

Apps or spreadsheets can help you spot discrepancies and confirm totals.

2. Adjust Your Withholding (If Needed)

Use the IRS W-4 and withholding calculator to decide if your current setup still makes sense.

Remember: your paycheck won’t look higher now, but your tax return will shift at filing time.

3. Talk to a Tax Pro

Especially if tips or OT make up a big part of your income.

They can help you strategize so you’re not surprised next April.

4. Pay Attention to States

Not every state is on board.

Colorado already decoupled from the OBBBA overtime deduction,

keeping it taxable for state purposes.

Others may follow.

Planning Matters

The OBBBA breaks are real — but planning matters.

The sooner you track, understand, and adjust, the better positioned you’ll be to take advantage of them when you file in 2026.

If you find this post helpful, please share it with your colleagues and friends. For more insights and tips on payroll practices, don’t forget to subscribe to the blog or follow me on LinkedIn.

👉 And next week, we’ll wrap up the OBBBA series by putting it all together in one Big Beautiful Blog Post.