Do you get paid overtime or tips? Here’s how the GOP tax bill could impact your money.

The expansive Republican-backed budget bill, dubbed by President Trump as “one big, beautiful bill,” encompasses several new tax regulations that could significantly impact millions of workers who earn tips or overtime pay. While the core of the bill extends President Trump’s 2017 tax cuts, it also includes provisions that align with his campaign promises, such as the commitment to eliminate taxes on tipped income.

The House Ways and Means Committee highlighted that the bill could result in savings of approximately $1,700 for each tipped worker and employees who earn overtime. However, there are constraints within the bill that may restrict the financial benefits for these workers, with some experts cautioning that the tax breaks may not be as advantageous as initially perceived.

An essential aspect of the bill is the “No Tax on Tips” provision, which aims to create a new tax deduction eliminating federal income taxes on tips for individuals in traditionally tipped occupations. Approximately 4 million Americans work in tipped occupations, representing 2.5% of all U.S. workers. The tax break comes with certain criteria, including an income cap of $160,000 in 2025, the requirement for workers and their spouses to have Social Security numbers, and the reporting of tips to the employer and on the worker’s W-2 form.

Despite the potential benefits, concerns arise regarding the exclusion of low-income tipped workers who do not pay federal income taxes. Additionally, there is apprehension that some employers may reclassify workers to take advantage of the tax break. The Senate has also passed a standalone bill, the No Tax on Tips Act, which mirrors the provisions in the larger bill but does not require workers or their spouses to have Social Security numbers.

Another significant component of the bill is the “No Tax on Overtime” provision, fulfilling another of President Trump’s campaign promises. This provision allows workers to claim a tax deduction for their overtime pay, with restrictions such as the necessity of a Social Security number and the expiration of the tax break after the 2028 tax year.

The average overtime worker stands to receive a tax cut ranging from $1,400 to $1,750 annually through this new provision. While the bill has passed the House, it is subject to potential changes in the Senate. The intricacies of the provisions are crucial for workers to understand as they navigate the implications of the new tax rules on their finances.