Good news for American workers — the One Big Beautiful Bill is now law, and it brings big changes for people earning overtime and tips. Promised by President Trump during his 2024 campaign, this law aims to boost take-home pay for millions.
What’s in the New Tax Bill?
The new law includes:
✅ More jobs through domestic energy and infrastructure boosts
✅ No federal tax on overtime pay
✅ No federal tax on tips (up to $25,000 a year)
✅ Bigger child tax credits
✅ A tax deduction on Made-in-America car loan interest
✅ Cuts to taxes for middle and working-class Americans
When Does No Tax on Overtime & Tips Start?
According to tax experts, the no-tax policy could take effect as soon as late 2025, depending on how quickly the IRS and Treasury Department implement the new rules.
- No tax on overtime: expected by late 2025
- No tax on tips up to $25,000/year: starting the same time
After $25,000 in tips, normal taxes apply.
What the Law Covers
| Income Type | Tax Rule Under New Bill |
|---|---|
| Overtime Pay | No federal tax |
| Tips (up to $25,000/year) | No federal tax |
| Tips (above $25,000/year) | Normal tax rates apply |
FAQs
Q: How does no tax on overtime work?
A: Overtime earnings will no longer be federally taxed, increasing your take-home pay.
Q: What is the $25,000 tip limit?
A: Only tips up to $25,000 per year are tax-free. Anything above that is taxed as usual.
Q: When will no tax on overtime start?
A: Expected late 2025, depending on IRS rule changes.
Q: Does this apply to all jobs?
A: The tip exemption only applies to jobs where tipping is standard (like restaurants, salons, hotels).
Final Thoughts
While it may not affect every worker, this bill could mean thousands more in annual earnings for tipped workers and those who regularly clock overtime. Keep an eye out for official IRS updates and consider adjusting your withholdings once new rules are announced.
