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How No Taxes on Tips and Overtime will work
Questions remain about how elements of the massive tax-and-spending bill signed by the President last week will play out. But here are some highlights from two hospitality industry legal experts. By Lisa Jennings on Jul. 08, 2025
resident Trump signed the mega tax-and- spending bill into law last week. Now details are P emerging about what the No Tax on Tips and Overtime elements will mean for both employers and workers within the restaurant industry. Attorneys say specific guidance from the federal government is expected within 90 days of the bill signing on July 4, so more detail is likely before early October. Among those details will be clarity on which workers, specifically, will be eligible for the tax deduction. The law specifies the no-tax-on-tips benefit can only go to workers who are customarily in the line of service, for example. It seems very likely that will include the estimated 2 million restaurant servers and bartenders nationwide. The tax relief for overtime, meanwhile, will impact non-exempt hourly workers more broadly, or an estimated 13 million people, according to the National Restaurant Association. How these deductions will actually work is, frankly, complicated.
“It’s going to be a busy year for accountants and people preparing taxes,” said Alden Parker, co-chair of the Hospitality Industry Group for the law firm Fisher Phillips. The tax benefit applies to tipped income and overtime already earned this year—since Jan. 1, 2025—and going forward. But it’s also temporary. The benefits are scheduled to sunset at the end of 2028, though it’s possible they could be extended at that point, notes tax attorney Marvin Kirsner, a shareholder in the law firm Greenberg Traurig. Here is their advice about what employers should expect.
No Tax on Tips
There are limits. Under the bill, the federal income tax deduction applies to the first $25,000 earned in tips, and it’s an “above-the- line” deduction, so people don’t need to itemize to get the benefit.
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