Last updated on September 5th, 2025
In our last article, we highlighted several provisions of the One Big Beautiful Bill Act (OBBBA) relevant to breweries and distilleries, including permanent 100% bonus depreciation, the increased Section 179 deduction, and immediate R&D deductions, to name a few. If you are an employer at a brewery or distillery, you should be aware of two additional provisions of the new tax law—the new “no tax on tips” and “no tax on overtime” rules. These provisions are likely applicable to your employees, and you’ll need to be aware of your reporting obligations. Here is some key information for both employees and employers regarding the new tip and overtime tax laws under the OBBBA.
“No Tax on Tips”
For Employees:
The OBBBA creates a temporary deduction of up to $25,000 per year for qualified tips received by individuals in occupations where tipping is regular and customary, available for tax years 2025 through 2028. The deduction begins to phase out when the taxpayer’s modified adjusted gross income (MAGI) exceeds $150,000 ($300,000 for joint filers). The deduction is limited to tips voluntarily paid by customers (not mandatory service charges), including tips shared through pooling arrangements.
For Employers:
Employers must separately report qualified tips for tipped employees. W-2s and 1099s will need to specify the qualifying occupation of the tip recipient. The Treasury Department is expected to issue a list of qualifying occupations (by October 2025) and provide further IRS guidance for tracking designated cash tips.
“No Tax on Overtime”
For Employees:
The OBBBA creates a temporary deduction of up to $12,500 ($25,000 for joint returns) for individuals who receive qualified overtime compensation (as defined by the Fair Labor Standards Act), available for tax years 2025 through 2028. The deduction applies only to overtime pay premiums (the amount paid in excess of the taxpayer’s regular rate of pay) and begins to phase out when the taxpayer’s modified adjusted gross income (MAGI) exceeds $150,000 ($300,000 for joint filers). Note that the deduction applies only to federally required overtime under FLSA (Section 7), not to enhanced state overtime rules or those negotiated under collective bargaining agreements.
For Employers:
Employers will need to track and separately report qualified overtime compensation on employee W-2s, which will require updating reporting systems.
Takeaways for Breweries and Distilleries
The new tax rules for tips and overtime under the One Big Beautiful Bill Act may provide significant benefits for employees of breweries and distilleries. Brewery and distillery employers and managers will need to update reporting and payroll systems to reflect the requirements of the new laws. Further IRS guidance on these provisions is expected by the end of the year. Meanwhile, please don’t hesitate to reach out to our experts at RBT CPAs with any questions about the recent tax law changes. As always, our team is here to support all of your business’s accounting, tax, audit, and advisory needs. Give us a call today to find out how we can be Remarkably Better Together.