August 1, 2025
Article by Martin Kuhn Examines Trump-Era Law’s Real Impact on Tips and Overtime
A timely and insightful article by labor and employment attorney Martin C. Kuhn breaks down the newly enacted “One Big Beautiful Bill Act” (OBBB) – a key legislative promise from President Trump’s 2024 campaign that aimed to eliminate federal income tax on employee tips and overtime pay.
But as Kuhn explains in his article, titled “One Big Beautiful Bill’s Impact on Tips and Overtime”, the law is more nuanced than advertised. While it doesn’t entirely remove taxes on these earnings, it introduces substantial deductions – up to $25,000 in tips and $12,500 in overtime wages – from federal taxable income for eligible workers.
Kuhn’s analysis offers practical insights on:
- How the deductions work: Employers still withhold taxes, but eligible workers can deduct qualified amounts when filing federal tax returns.
- Who benefits most: Higher-income earners like police, firefighters, and high-end tipped workers will likely see the greatest tax savings.
- Key limitations: The law phases out benefits for those earning over $150,000 ($300,000 joint) and does not apply to state income taxes or Social Security/Medicare.
- Unresolved questions: From ambiguous definitions of “traditionally tipped” roles to potential litigation over underreported tips or misclassified overtime.
Kuhn’s piece encourages workers and employers alike to take a close look at the law’s finer points, especially as we approach the 2025 tax year. While it falls short of “no taxes,” the OBBB still delivers measurable tax relief to millions of working Americans—just not as broadly or simply as some might expect.
Read the full article on the Wisconsin State Bar’s website here:
One Big Beautiful Bill’s Impact on Tips and Overtime
This is essential reading for HR professionals, wage-and-hour attorneys, and anyone whose compensation includes tips or overtime.
