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Wednesday, Jul. 16, 2025

Does Trump’s big bill end taxes on tips and overtime?

Tom Kertscher / Wisconsin Watch, Wisconsin Watch
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.

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