The recent passage of a significant tax policy by the House of Representatives introduces major changes, including the elimination of federal income taxes on cash tips and overtime pay. This legislation, known as the “big beautiful bill,” is part of President Donald Trump’s $4.5 trillion tax breaks and spending cuts initiative. It aims to extend the tax cuts from 2017 and fulfill a campaign promise to remove taxes on tips.
Under the new policy, federal income tax on cash tips will be deducted up to $25,000 annually for a four-year period, with potential reinstatement after 2028. Additionally, overtime pay will not be taxed up to $12,500 for individuals or $25,000 for joint returns. The bill also includes a temporary elimination of taxes on car loan interests from 2025 to 2028.
While proponents argue that these measures will boost take-home pay and stimulate economic growth, critics express concerns about potential increases in the national debt and loss of health insurance coverage for many Americans. The White House suggests that economic growth resulting from the bill will offset debt concerns, though opposition remains strong, particularly among Democrats who fear negative impacts on public services and fiscal stability.