The President and congressional leaders are promising big savings for tipped workers and hourly employees who clock over 40 hours a week.
No tax on tips and no tax on overtime were campaign promises President Donald Trump made during the 2024 election.
“It is going to be the largest tax cut for working and middle class families in American history,” said Congressman Aaron Bean (R-FL 4th District).
Congressman Bean explains that all workers making under $160,000 a year would be eligible for tax-free tips and overtime pay under the House plan.
“And for somebody making tips, it’s going to be drastic. It’s gonna be very drastic. For those that aren’t in overtime very often or earn very little tips, it’s still gonna be big,” said Bean.
Unlike the House plan, the proposal in the US Senate caps the level of earnings in tips and overtime exempt from taxes at $25,000 in most cases.
Under both plans, however, workers shouldn’t expect to see a difference on their paychecks.
Instead, total tipped and overtime pay would be deducted from workers’ annual taxes, either reducing what they owe, making them eligible for a tax return, or even dropping them into a lower tax bracket in some cases.
“It’s all about rewarding enterprise in America. Rewarding people who work longer, harder. Those are basically fundamental tenants of American exceptionalism,” said Florida TaxWatch President Domonic Calabro.
Related: Here’s what made it into Florida’s $1.3 billion tax cut package
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Calabro argued the plan would especially be a boon for Florida.
“Because we have a very high percentage of our workforce is in one of the major components, economic sectors, and that’s hospitality,” said Calabro.
Congressman Bean said the goal is to get the bill on the President’s desk by July 4th.
That’s a self-imposed deadline congressional leaders have set.
At the end of the day, though, Bean noted the bill just needs to clear the finish line by the end of the year to avoid a potential tax hike, with the previous Trump tax cuts set to expire on December 31st.
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