US Tax Changes: Deductions for Tips, Overtime, and Social Security

Recent US tax legislation introduces deductions for tips, overtime pay, and Social Security benefits for seniors. While initially presented as tax eliminations, the bill now provides above-the-line deductions with income thresholds. "Highly compensated employees," defined as those earning over $80,000 annually, are ineligible for these deductions. Social Security benefits now have a $4,000 deduction for seniors 65 and older, subject to modified adjusted gross income limits. This change is expected to provide significant tax relief for lower-income individuals. The deductions are effective from 2025 to 2028 and will be phased out. The new provisions offer a degree of clarity to the tax code, but the income limits may exclude many from the benefits.