Trump Signs Landmark Bill Making Tips Tax-Free and Extending Key Tax Cuts
On July 4, 2025, President Donald J. Trump signed the One Big Beautiful Bill Act (OBBB) into law, a sweeping tax measure that preserves major federal tax reductions set to expire at the end of the year and introduces new benefits aimed at working Americans.
A central feature of the law is the No Tax on Tips provision, which removes federal income tax on customer-provided tips for service-industry workers.
Under this change, servers, bartenders, delivery workers, and other tipped employees may continue reporting tip income but no longer owe federal tax on those earnings, a major shift widely praised in hospitality and tourism-driven regions like Nevada and Florida.
Beyond tips, the OBBB extends existing tax cuts permanently and adds targeted relief measures, such as tax-free overtime pay and an increased deduction for seniors living on fixed incomes.
Supporters argue these measures help employees keep more of their take-home pay, encourage workforce participation, and provide financial breathing room for older Americans.
According to the Congressional Budget Office, the bill could add an estimated $3.4 trillion to the federal deficit over 10 years.
Critics express concern over long-term fiscal impacts and note that the law primarily benefits specific industries rather than implementing a broad tax reform.
Still, polling from mid-2025 reflects strong support from hospitality workers, who say tax-free tips and overtime offer meaningful relief in sectors where wages can vary and costs continue to rise.
The OBBB is expected to shape debates on tax policy and labor incentives for years to come, balancing worker benefits and economic stimulus against questions surrounding federal spending and long-term fiscal planning.
