Overview
We reported in May on the provisions in the House’s One Big Beautiful Bill addressing two of President Trump’s campaign promises – no taxation of tips and overtime. The Senate has now passed its version of the One Big Beautiful Bill, which includes its version of these provisions in sections 70201 and 70202. See our prior blog post here for a detailed discussion of the House provisions. While the basic structure of the provisions are similar, there are differences in the details.
What Stays the Same
Above-the-line deductions for qualified tips and qualified overtime
Like the House bill, the Senate bill would give certain workers an above-the-line deduction for “qualified tips” and “qualified overtime compensation” included on an information return furnished to the individual or reported on a Form 4137 (for tips) for taxable years beginning after December 31, 2024, and ending for taxable years beginning after December 31, 2028. This means the deductions are proposed to be retroactive and proposed to apply to amounts paid even before enactment of the bill. Making this deduction available to the worker creates reporting and withholding obligations for the service recipient, as discussed in more detail below.
In order to be deductible as qualified overtime compensation under the Senate provision, as was true with the House provision, the payment must be overtime paid as required under section 7 of the Fair Labor Standards Act that is in excess of the regular rate (as...
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