But there are concerns about potential conflicts between state and federal overtime laws, Parker said. Parker said the No Tax on Overtime rule is more likely to benefit back-of-the-house workers, who more routinely work overtime. And tipped income that is part of that overtime wage would not be eligible, of course, since that would be covered under No Tax on Tips, and people can't double dip. No Tips on Overtime Also limited . The deduction for overtime is limited to $12,500 for those filing as singles, and $25,000 for couples filing jointly. And, as with the No Tax on Tips element, it also phases out for those earning $150,000 or more (or $300,000 for couples). The deduction only applies to overtime pay above the regular rate. Overtime pay is typically time and a half. So, in this case, the income eligible for the no-tax benefit is only the “half.” For example, a worker who earns $20 per hour would earn $30 for overtime: $20 plus another $10 per hour. But the tax benefit would only apply to the $10.
“They may not be catching the nuances there between a state overtime hour that wouldn’t count as a federal overtime hour,” he said. Depending on the final guidance, Parker said No Tax on Tips and Overtime have the potential to be a huge benefit to restaurant workers. And though the direct benefit to employers is not there, it does offer the prospect of an indirect benefit, he said. “The question is: does it draw more people to the industry that want to work, want to work hard, want to deliver amazing service to generate tips?” Parker said. “We might have a real solution to constricted labor issues that come and go within the industry.” “The question is: does it draw more people to the industry that want to work, want to work hard, want to deliver amazing service to generate tips?” Parker said. “We might have a real solution to constricted labor issues that come and go within the industry.” Federal laws say overtime is due when employees work beyond a 40-hour week. But some states have rules based on an eight-hour day, saying overtime must kick in regardless of whether the worker exceeded a 40-hour week. That means overtime pay might be taxed differently at the state and federal level, which will be difficult for workers (and employers) to navigate.
Lisa Jennings is a veteran restaurant industry reporter and editor who covers the fast-casual sector, independent restaurants and emerging chain concepts.
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