Federal tax break on tips and overtime now in effect, impacting millions

COLUMBUS, Ohio — Millions of U.S. workers are now reaping the benefits of part of President Donald Trump’s budget bill. The no tax on tips and overtime provisions are now in effect.

Kelley Metzger has worked as a server at the Nutcracker Family Restaurant in Pataskala for 10 years. She started when she was a high school sophomore.

“I love associating with people, learning the stories about everybody,” Metzger said.  

She works hard for the dollars left on the table and believes not paying taxes on them will really benefit her in the long run.   

“I feel like I’ll be able to save a lot more,” Metzger said. “We appreciate what people do give us. So, we appreciate being able to keep a little bit more of that.” 

Steve Butcher and his wife own the family restaurant. They bought it from his parents in 2019. Of his 40 employees, 15 are tipped workers. 

“When you look at a tipped worker, they work really hard, and in reality, they’re the lifeblood of our business,” Butcher said.  

Ohio Republican Sen. Bernie Moreno came to the Nutcracker Friday to talk with workers and diners about the impacts of the no tax on tips and overtime provisions in the bill.  

“We’ve got to tell the story of what this bill does,” Moreno said.

Under the bill, both cash and credit card tips are included. Workers can deduct up to $25,000 in tips, if they make less than $150,000 a year. The tax break applies only to federal income taxes, not state and local income taxes. The provision is in effect for 2025 through 2028.

Moreno says even with this now in place, more needs to be done for workers. 

“Working class Americans have been taking it in the gut for decades, certainly the last four years with inflation, the price of everything,” Moreno said.

The bill also allows workers to write off overtime pay up to $12,500 per year. Like tipped workers, the amount they can deduct reduces if they make more than $150,000 per year. 

Several of Butcher’s workers will benefit. 

“I have a lot of my staff that work six days,” Butcher said. “They work really hard. They put a lot of hours in.”

Metzger says she works about 45 hours a week. So, with overtime and tips, she is starting to think about what she may be able to do with her double deduction. 

“Buying a house, perhaps, or a new car,” Metzger said.