LoginDoes Trump’s big bill end taxes on tips and overtime?
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No.
President Donald Trump’s recently enacted big bill removes the federal income tax on certain tips and overtime, but those tax deductions end in 2028 and have other limitations.
Under the new law, restaurant servers, barbers and other workers who typically work for tips can deduct up to $25,000 of tip income – meaning that amount isn’t taxable.
For overtime pay, the tax deduction is up to $12,500.
Both deductions generally are for people who earn less than $150,000 annually.
Federal payroll taxes for Social Security and Medicare (FICA), and state and local taxes, still apply.
The tipped income provision would affect about 2% of households, and they would receive an average tax cut of $1,800 annually, the nonpartisan Tax Policy Center estimated.
About 8% of hourly workers and 4% of salaried workers regularly work overtime, according to the Yale Budget Lab.
The average annual savings for the overtime provision is $1,400, according to the White House.
This fact brief is responsive to conversations such as this one.
We’ve written more extensively about this topic in a different article. You can read more about it here.
Sources
- Congress.gov: H.R.1 – One Big Beautiful Bill Act
- Fortune: The rules for paying taxes on tips and overtime are changing thanks to Trump’s Big Beautiful Bill. Here’s what to expect
- RSM: No tax on tips and overtime: What employers should know
- Tax Policy Center: Tax-Free Tips: How Would They Impact Tipped Workers?
- Yale Budget Lab: “No Tax on Overtime” Raises Questions about Policy Design, Equity, and Tax Avoidance
- The White House: President Trump has signed the One Big Beautiful Bill into Law
- Associated Press: What to know — and what isn’t known yet — about US tax deductions for tips and overtime pay
- CNBC: Trump’s ‘big beautiful’ bill promises no tax on tips and overtime, but there’s a limit—here’s who qualifies
- USA Today: Did 'Big Beautiful Bill' include no tax on overtime? What to know about Trump’s 'promises kept'
- BankRate: No tax on tips and overtime: Here's how your taxes may shrink
Does Trump’s big bill end taxes on tips and overtime? is a post from Wisconsin Watch, a non-profit investigative news site covering Wisconsin since 2009. Please consider making a contribution to support our journalism.
