With Sharpie in hand and military jets overhead, President Trump marked Independence Day by signing H.R. 1, best known as the "One Big Beautiful Bill," or "OBBB"—into law.

Seyfarth Synopsis: The freshly enacted "One Big Beautiful Bill" introduces two above-the-line tax deductions for tips and overtime wages. While these deductions offer potential savings for eligible workers, they come with new compliance obligations and nuanced legal considerations that employers will need to navigate carefully.

With Sharpie in hand and military jets overhead, President Trump marked Independence Day by signing H.R. 1, best known as the "One Big Beautiful Bill," or "OBBB"—into law. Among the bill's myriad provisions are two long-promised pledges: no tax on tips, and no tax on overtime.

Starting with the 2025 tax year, OBBB will allow workers below certain income thresholds to deduct up to $12,500 in "qualified overtime compensation" ($25,000 for on a joint return), and $25,000 in "qualified tips." To emphasize the benefit for impacted workers, the White House has launched a calculator on its OBBB website, which calculates estimated tax savings based on user inputs for weekly base wages, tips, and overtime.

Of course, these provisions' full impact lies in the details. The OBBB reflects nuance about which workers are eligible for deductions, and what amounts they may deduct. For employers, the new law may require updated wage tracking and reporting capabilities, and it could cause a shift in...

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