From our partners at The Compliance Center and WFJ Law Firm

Two proposed federal bills currently under review could offer significant tax relief for millions of workers—especially those in tipped industries and positions involving frequent overtime. While these bills are not yet law, they’re moving quickly through Congress and could have a notable impact on payroll planning, employee benefits, and year-end reporting for employers across several industries.

Here’s what you need to know as an employer.

Proposed Bills Aim to Ease Tax Burden for Workers

1. House Bill: Broad Deductions for Overtime and Tips
Often referred to as the “One Big Beautiful Bill,” this proposal has already been passed by the House of Representatives. If enacted, it would allow employees earning less than $160,000 annually to deduct both overtime wages and tipped income from their taxable income—with no cap on the amount that can be deducted.

Industries expected to benefit from this bill include:

• Food and beverage (e.g., restaurants, cafes, hotels)
• Beauty and grooming services (e.g., salons, barbershops)
  

2. Senate Bill: No Tax on Tips Act

The Senate has passed its own version of a tax relief bill, focused more narrowly on tipped income. This bill would also apply to employees making under $160,000 per year but only allows deductions on tipped income, not overtime. Additionally, the deduction is capped at $25,000 in tipped earnings.

What Employers Should Expect

Currently, each chamber is reviewing the other’s proposal, and a final version is expected to be voted on in August. President Trump has expressed support for this type of tax relief, increasing the likelihood that some form of the legislation will be signed into law.

Why This Matters to Employers

While these changes are aimed at employee tax relief, they also have implications for HR, payroll, and compliance teams. As an employer, you may need to:

• Update payroll systems to reflect new tax deduction options
• Educate employees on how these deductions could affect their take-home pay
• Coordinate with tax professionals or advisors to understand reporting obligations
  

If you operate in industries where tipped income or overtime is common, staying ahead of these developments is especially important.

Stay Informed and Prepared

At AssetHR, we’re committed to helping employers navigate changes in tax law, compliance, and workforce management. Our team is monitoring the progress of both bills and will provide timely updates as more information becomes available.

Have questions or want to prepare your HR team for what’s ahead? Contact AssetHR today. We’re here to support you with proactive strategies and personalized guidance to keep your organization compliant and informed.