""The big four changes affect taxes on tips, taxes on overtime, a new senior deduction and a higher cap on deductible state and local taxes," said Jill Brown, a tax preparer at Keegan's Tax & Financial Services who has been doing tax returns in Vallejo for 31 years. One important thing to remember about these new developments: they don't apply to everyone, and different people may be affected differently, said Brown. Many of the provisions involve income limits, for example."
""Workers who reported tips on their 2025 W-2 will be able to deduct up to $25,000 in qualified tips," Brown said. The IRS defines "qualified tips" are voluntary cash or charged tips received from customers or through tip sharing. Examples of people who might qualify for the deduction include wait staff, bartenders, salon workers, personal trainers and gig economy workers. The tip deduction phases out for people who make more than $150,000 ($300,000 for married couples)."
New federal tax provisions from the One Big Beautiful Bill of 2025 take effect this year and change federal tax credits, deductions, and reporting while leaving California state tax unchanged. Key changes include a qualified tip deduction up to $25,000 per filer with phaseouts above $150,000 ($300,000 for married couples) and a qualified overtime deduction up to $12,500 ($25,000 for couples), both temporary through Dec. 31, 2028. A new senior deduction and a higher cap on deductible state and local taxes are also included. Many provisions include income limits and additional eligibility requirements such as a Social Security number for the tip deduction.
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