What Should Dealers Know About the Tip and Overtime Deduction Provisions of the One Big Beautiful Bill Act? BY THE NUMBERS For tax years 2025-2028, the One Big Beautiful Bill Act (OBBBA) allows employees to take an above-the-line deduction on qualified tips and overtime pay. There is a lot of confusion around these provisions, creating room for misinformation and attempted manipulation of the rules. This article aims to clarify how the new law applies within dealerships and what dealers should understand about employee questions and reporting responsibilities. TIPS The Treasury Department has published a list of occupations that “customarily and regularly” receive tips. The only listed occupations which may traditionally be employed by auto dealerships are auto detailer and shuttle driver. In my experience, these employees typically do not receive tips from Steve Williams, CPA/ABV Tetrick & Bartlett PLLC customers; even if they did, they are likely not reporting those tips as compensation. OVERTIME The overtime deduction is more likely to affect dealership employees, and it may be a significant source of confusion when taxpayers file returns for the first time under OBBBA in early 2026. Many dealership employees work more than 40 hours per week, and some pay plans provide additional compensation for hours worked beyond that threshold. However, the law is explicit: If an employee is classified as exempt under the Fair Labor Standards Act (FLSA), then none of their additional compensation qualifies as deductible overtime. Exempt Employees (Not Eligible for Qualified Overtime) • Sales: Employees primarily engaged in selling automobiles and trucks. • Parts: Employees primarily engaged in requisitioning, stocking and dispensing parts. • Technicians: Employees primarily engaged in mechanical work on the vehicles. (This does not include quick lube technicians primarily performing oil changes and tire rotations.) • Service Advisors: Employees who meet with customers to discuss and arrange vehicle repairs. WVADA NEWS 16
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