No tax on tips or overtime, with a catch: What to know as Trump’s Big Beautiful Bill passes the Senate

On Tuesday, the Senate narrowly passed President Donald Trump’s “Big, Beautiful Bill” with a 50-50 vote, with Vice President JD Vance breaking the tie, to get the legislation across the finish line after an all-night session. The bill now goes back to the House of Representatives for a final vote, as the GOP races to finish passage of the bill before the upcoming July 4 holiday weekend.

Tucked away among the 940 pages of the massive bill are an array of new tax write-offs. Many of the exemptions are promises Trump made on the campaign trail when he was running for a second term.

One of them, which was first introduced to the Senate in January as the No Tax on Tips Act, gives taxpayers the ability to write off income from tips and overtime pay. But here is a catch: the rule expires at the end of 2028, right before Trump leaves office.

On June 16, 2025, the Senate Finance Committee released legislative text on this intended for inclusion in the Senate’s version of the budget reconciliation bill.

The legislation gives eligible employees making up to $160,000 in 2025 an economic break (the limit will be adjusted each year for inflation). It creates new tax deductions of up to $25,000 on income made from tips, limited to cash tips, and on tips that workers report to employers for the purposes of withholding payroll taxes.

It also expands the business tax credit for the portion of payroll taxes that an employer pays on certain tips, to include payroll taxes paid on tips received in connection with certain beauty services.

Bill could create changes to W-2 reporting

When it comes to overtime, the current legislation would require that employers specify on W-2 forms how much overtime an employee received during a given tax year, using a 1040 Form, with reporting starting as early as the 2025 tax year.

The overtime deduction would be available to eligible taxpayers, regardless of whether they itemize. However, in order to claim the deduction, one would have to provide their Social Security number on their 1040 form, or that of their spouse when joint filing.