The House of Representatives just passed what’s being called President Trump’s “One Big Beautiful Bill”, and New Hampshire workers are buzzing with excitement. This new legislation officially eliminates federal income taxes on tips and overtime pay for eligible employees, a game-changer for many who rely heavily on these earnings. Whether you’re a bartender, delivery driver, or restaurant worker, this could mean more money in your pocket starting next year.
In this article, we’ll break down exactly what the bill entails, how it impacts workers in New Hampshire and beyond, and what you need to know to make the most of this new law. Stick with me as we unpack the key details, practical advice, and answer your burning questions about this landmark tax change.
House Passes Trump’s ‘Big Beautiful Bill’
| Key Provision | Details | Impact |
|---|---|---|
| Tax-Free Tips | Up to $25,000 in tip income exempted from federal income tax | More take-home pay for tipped workers |
| Tax-Free Overtime Pay | Overtime earnings exempt from federal income tax for qualifying workers | Extra earnings won’t be taxed |
| Senior Standard Deduction Increase | $4,000 additional standard deduction for seniors | Helps reduce taxable income for retirees |
| SALT Deduction Cap Raised | From $10,000 to $40,000 for certain income levels | Benefits taxpayers in high-tax states |
| Federal Spending Cuts | Medicaid and SNAP program cuts over next decade | Controversial cuts impacting low-income |
President Trump’s “Big Beautiful Bill” marks a major victory for tipped and overtime workers, especially in states like New Hampshire where these earnings are a critical part of many Americans’ incomes. By eliminating federal income taxes on tips and overtime pay, the bill aims to put more money back in the hands of hardworking individuals.
While the bill includes other significant tax and spending changes, this key provision shines as a practical win for millions of workers. If passed into law, it will take effect in 2025, so now’s the time to start planning and understanding how it can benefit you.
What’s the Big Deal About This ‘Big Beautiful Bill’?
This bill is packed with several provisions aimed at reshaping tax rules and federal spending, but the most buzzworthy part is the elimination of federal income tax on tips and overtime pay. That means if you’re pulling in extra hours or relying on tips to make ends meet, Uncle Sam won’t be dipping into those earnings anymore.
For workers in New Hampshire, where industries like hospitality, food service, and personal care heavily depend on tipping culture, this change is huge. Imagine your monthly paycheck, now with more cash staying in your wallet rather than heading to the IRS.
The bill also increases the standard deduction for seniors by $4,000 and raises the State and Local Tax (SALT) deduction cap, giving relief to middle and upper-middle-class taxpayers, especially in high-tax states.
Breaking Down the Tax-Free Tips & Overtime Pay
What Counts as a Tip?
Tips are the cash or electronic payments you receive from customers directly for the service you provide. Think bartenders getting a dollar or two on a drink, delivery drivers receiving a gratuity, or hairstylists earning extra from happy clients.
Currently, all tips are subject to federal income tax, which can significantly eat into what workers take home. Under this bill, up to $25,000 of tip income annually will be exempt from federal income taxes. For many, that’s a substantial tax break.
How About Overtime?
Overtime pay — typically 1.5 times your hourly wage for hours worked beyond 40 per week — will also be exempt from federal income taxes for qualifying workers. This exemption means that those clocking extra hours won’t lose a portion of their hard-earned overtime to federal income taxes.
Practical Example: What This Means for You in NH
Let’s say Jessica, a waitress in Manchester, NH, makes about $20,000 in salary and earns $10,000 in tips. She often works overtime, pulling in an extra $5,000 annually.
Before the bill, Jessica would have to pay federal income taxes on her $10,000 in tips and $5,000 in overtime, possibly losing around 20-25% to taxes, depending on her tax bracket.
After the bill passes, Jessica’s tip income (up to $25,000) and overtime pay are tax-free. That means she saves roughly $3,750 in federal taxes annually, translating to more cash for groceries, bills, or savings.
What About Employers?
While workers celebrate, some critics argue this bill could let employers off the hook for paying fair base wages, relying more on tips to fill in the gaps. But on the flip side, exempting tips from federal taxes may encourage businesses to maintain or increase tipping culture without burdening employees.
Employers should keep in mind new reporting requirements and ensure compliance with updated payroll systems once the bill takes effect.
Other Noteworthy Changes in the Bill
Senior Citizens Get a Break
Seniors will benefit from an additional $4,000 standard deduction, easing their tax burden. This change is especially helpful for those living on fixed incomes.
SALT Deduction Cap Increase
The bill raises the SALT deduction cap from $10,000 to $40,000 for qualifying income levels. If you’re paying high state or local taxes, this could reduce your federal tax bill significantly.
Federal Spending Cuts: What to Know
The bill includes notable cuts to Medicaid and SNAP programs, which have sparked debates about the potential impact on vulnerable populations. It’s important to monitor these changes if you or your family depend on such programs.
Timeline: When Will These Changes Take Effect?
If the bill clears the Senate and gets signed by the President, these provisions, especially tax exemptions on tips and overtime, are set to take effect starting January 1, 2025.
What You Should Do Next: A Step-By-Step Guide
1. Understand Your Income Sources
Make a list of your income sources, including base salary, tips, and overtime pay. This will help you estimate how much tax relief you might expect.
2. Adjust Your Tax Withholding
Once the law is in effect, consult with a tax professional or use IRS tools to adjust your federal tax withholding. This ensures you don’t overpay taxes throughout the year.
3. Talk to Your Employer
Check if your employer has updated payroll systems to reflect these changes. If not, gently remind them to stay compliant to avoid tax complications.
4. Stay Updated
Keep an eye on official government websites and trusted news outlets for updates as the bill progresses through the Senate and any modifications that may occur.
Frequently Asked Questions (FAQs)
Q1: Does this bill eliminate state income taxes on tips and overtime?
A: No, this bill only affects federal income taxes. State income tax rules vary by state and tips/overtime may still be taxable at the state level.
Q2: What if I earn more than $25,000 in tips?
A: Only the first $25,000 of tip income is exempt from federal income tax. Any tips earned above that amount will be taxable.
Q3: How does this affect Social Security and Medicare taxes?
A: Tips and overtime pay may still be subject to Social Security and Medicare taxes (FICA). This bill only addresses federal income tax.
Q4: Will this change affect my eligibility for government benefits?
A: Potentially. Because taxable income affects eligibility for certain benefits, exempting tips and overtime from federal income tax could change your benefit calculations.
Q5: How can I verify if this bill has passed into law?
A: Follow updates from the U.S. Congress official website or trusted news sources like Reuters and AP News.
