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When Does No Tax on Overtime Start? About the New Resolution
The Senate has passed a budget resolution under Donald Trump’s new administration. Learn when the proposed tax cuts could start.
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One month after Donald Trump took office, one of his proposals to end certain taxes was approved by House Republicans in a budget resolution. The approval allows the GOP to use legislative reconciliation, which can help avoid a filibuster from Senate Democrats and enable a quicker passage. Last year, Trump promised voters that he would end taxes on overtime pay, tips and Social Security. Former Vice President Kamala Harris also supported this, endorsing the proposal in August 2024. Now that the Senate found a way to propel the resolution forward, when can hospitality workers expect the tax eliminations to start?
Below, learn more about the proposal to end taxes on tips and overtime pay.
What Is the No Tax on Overtime & Tips Bill?The bill does not focus only on ending taxes on tips and overtime pay. However, it’s a major portion of the proposal and is supported by Americans who work in the hospitality industry, such as bartenders, servers and valets.
The current tax code withholds a worker’s tips of $20 or more in a month. Tips include cash and/or debit and credit card charges to one employee. Employers must, in turn, withhold income taxes in addition to the employee’s share of Medicare and Social Security taxes.
As for overtime standards in America, the Fair Labor Standards Act indicates that non-exempt employees receive time-and-a-half compensation while working more than 40 hours in a week. Current federal income taxes treat overtime as taxable wages, and employees see those withholdings on their paystubs. Salaried employees are not eligible for overtime pay or tips in a workplace.
If the proposal is eventually signed into law, workers can benefit by taking home a larger amount of their total pay.
When Does No Tax on Overtime & Tips Start?Since the bill has to go to the House after the Senate, there is no clear timeframe when the tax cuts could begin. Earlier this year, Trump spoke to a crowd of supporters in Nevada, vowing the “no tax on tips” move would be enacted during his presidency.
“So, if you’re a restaurant worker, a server, a valet, a bellhop, a bartender or one of my caddies,” Trump began before joking, “I go through caddies like candy; if I play badly, I always blame my caddy.” He then added, “Your tips will be 100 percent yours. Won’t that be nice?”
Will There Be Medicaid Cuts in 2025?It’s unclear when or if any tax cuts could happen this year. The resolution does not specifically refer to a tax on Medicaid, per Newsweek. However, it would instruct the House Committee on Energy and Commerce — which has jurisdiction over Medicaid — to come up with $880 billion worth of cuts.
House Minority Leader Hakeem Jeffries has openly criticized the resolution, telling reporters, “The House Republican budget resolution will set in motion the largest Medicaid cut in American history.”
