One Big Beautiful Bill Act – FAQs for 2025 Tax Returns

What is the OBBBA?

The One Big Beautiful Bill Act (OBBBA or OB3), signed into law on July 4, 2025, is a sweeping U.S. federal statute that enacts significant tax and spending policies, primarily by making permanent many provisions of the 2017 Tax Cuts and Jobs Act (TCJA) and introducing new, temporary deductions for 2025-2028 tax returns.

More details about the OBBBA can be found here at the IRS website.

Who is impacted by OBBBA?

There are numerous important changes in the bill, but a few may specifically impact Purdue employees who work overtime or receive tips as part of their Purdue position.

Please consult with a qualified tax professional to know how any tax changes apply to your specific situation.

I have overtime at Purdue, what do I need to have for my 2025 taxes?

Employees should review their 2025 W-2, specifically Box 14, to determine whether they have qualified overtime compensation that may be deducted.

Are there limits or restrictions on who can deduct Overtime premium income?

Employees who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay – such as the “half” (premium) portion of “time-and-a-half” compensation.

The half-time premium portion of the Overtime pay will be reported on the 2025 W-2, Box 14 as “OT PREM”.

The maximum annual deduction is $12,500 for Single and Head of Household filing statuses; $25,000 for Married Filing Joint filers.

Why does my Overtime pay total on my year-end Purdue pay statement not match the amount on the 2025 W-2, in Box 14?

The amount in Box 14 will not match your pay statement, because it is just the half-time portion (premium) of the regular rate per hour + half-time overtime rate.

The actual half-time pay (premium) above the regular hourly rate of pay is equal to one-third (1/3) of the total overtime wages paid in a year.

Example

$12.00 / Hourly rate X .5 = $6 OT premium

$12.00 + $6.00 = $18.00 overtime rate

$6.00 OT premium = 1/3 of the overtime rate

Only $6 x actual OT hours worked will be reported in Box 14 as “OT PREM”.

I received tips at Purdue, what do I need to have for my 2025 taxes?

Employees should review their 2025 W-2, specifically Box 7, to determine whether they have qualified tip wages that may be deducted.

Are there limits or restrictions on who can deduct tip income?

Taxpayers must have income from an occupation where tips are customarily and regularly received. The maximum annual deduction is $25,000.

I have questions about my overtime or tips documented on my 2025 W-2, who can help me?

For questions regarding the amount reported on your W-2, contact tax@purdue.edu. Employees should consult with a qualified tax professional with any questions they have on how to incorporate this reported amount into their personal tax return.

Will my Purdue pay or tax withholding change for Overtime or Tip income?

Your Purdue pay and tax withholding will not be affected by these changes. These are deductions that you would list on your personal tax return.