The "no tax on tips" provision within the Senate version of the One Big Beautiful Bill Act allows tipped workers to deduct tip income from their federal taxable income, up to $25,000 annually. The deduction phases out for individuals earning more than $150,000 and couples earning over $300,000.

The Senate narrowly approved Trump's tax bill, which includes a provision that would make his “no tax on tips” campaign promise a reality.

The proposed overtime tax break would function similarly to the tip income deduction. Overtime wages would still be subject to withholding, but workers could deduct federal income taxes paid on those wages when filing their returns, even if they don’t itemize. The deduction would apply to tax years 2025 through 2028.