The IRS has explained how to determine the amount of qualified tips, how to claim the deduction, up to $25,000, and the phaseout for modified adjusted gross income greater than $150,000 ($300,000 for married taxpayers filing joint returns). Workers can claim this deduction whether they claim the standard deduction or itemize.

To claim the deduction, tips must be reported, and married taxpayers must file a joint return. The new instructions also provide examples of different scenarios for tipped workers, worksheets to help tipped workers calculate their tipped income, and information on lists and categories of occupations where workers customarily and regularly receive tips, as well as definitions of qualified tips.

In addition, the IRS has explained how certain workers can claim a deduction for overtime compensation they received. Married taxpayers must file a joint return to claim this deduction. Workers can claim this deduction whether they claim the standard deduction or itemize.

The new instructions describe how taxpayers can claim a deduction of up to $12,500 ($25,000 if married filing jointly) and explain how the deduction is reduced when MAGI exceeds $150,000 ($300,000 if married filing jointly).

The instructions define qualified overtime compensation as overtime compensation that is paid as required under section 7 of the Fair Labor Standards Act of 1938, and more than the amount of the regular rate of pay.

You can claim a deduction for car loan interest. Taxpayers can deduct qualified passenger vehicle loan interest whether they claim the standard deduction or itemize.

 

The instructions define the terms “qualified passenger vehicle loan interest,” “applicable passenger vehicle,” “final assembly in the United States,” and “personal use,” and provide an example.