WASHINGTON, D.C. — Tipped workers and hourly employees who depend on overtime just got a significant financial boost, thanks to a new tax provision included in a sweeping budget bill signed into law by President Donald Trump.
Nicknamed his “big beautiful bill,” the legislation allows:
- Tipped workers to deduct up to $25,000 a year in reported tips
- Hourly employees to deduct up to $12,500 in annual overtime pay
These tax breaks aim to ease the financial burden on service industry workers, especially in restaurants, hospitality, and retail — sectors where unpredictable pay and long hours are the norm.
“That’s 90% of My Income”
Bartender Hugo Llanos said the change will make a meaningful difference in his life.
- “That’s like 90% of my income right there,” he said, referring to the tips he earns behind the bar.
- “It gives us an opportunity to enjoy our cities a little more — and have a little breathing room.”
Tips That Go Further
A recent SquareUp.com study shows that tips account for about 21% of a restaurant worker’s income in Florida — a figure echoed in other states like Ohio, where server Hannah Soltay praised the reform.
“It means more knowing that the money you meant for a person is actually going to the person,” Soltay said.
What the Savings Look Like
According to a White House report published in May, the average tipped worker could save just under $1,700 per year under the new deductions. Llanos says the $25,000 cap is more than fair:
“Just based off my taxes last year, I probably doubled or tripled that in tips,” he said.
Read Also: ‘Big Beautiful Bill’ Targets Tax Cuts for Seniors Receiving Social Security
Overtime Workers Also Benefit
Hourly employees who frequently work overtime — from warehouse staff to nurses — will also see relief. They can deduct up to $12,500 in additional earnings, potentially reducing their tax bills by hundreds or even thousands of dollars, depending on their income bracket.
These tax provisions are set to expire in 2028, unless renewed by future legislation.
Do You Work in a Tipped or Hourly Role?
How will this new law impact your finances? Share your story in the comments and join the conversation. Ridgecrestpact.org wants to hear from you!
