House passes Trump's 'big beautiful bill.' When does no tax on overtime, tips start in MA?

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President Donald Trump’s “One Big Beautiful Bill,” passed by the U.S. House early Thursday morning, includes major changes to Medicaid, food stamps, border security, taxes and more that have the potential to affect millions of Americans. 

It also includes two of his major campaign pledges: to remove taxes on tips and overtime.

Massachusetts lawmaker Rep. Marc Lombardo, R-Billerica, has also filed a bill to get rid of taxes on overtime wages.

This is what to know about no tax on overtime in Massachusetts.

What is no tax on overtime?

Currently, overtime wages are treated like regular wages with federal and state income taxes.

Under the Big Beautiful Bill, workers who are paid overtime would be able to claim a new tax deduction through 2028, as could workers who are tipped.

The bill includes guardrails to stop "highly compensated employees" from claiming the deduction and requires workers to list their Social Security number when they claim the deduction, which bars undocumented workers from claiming it.

Federal revenue could be reduced by $680 billion to $866 billion from 2025 to 2034 if overtime pay wasn't taxed, according to a study by the Tax Foundation and Yale’s Budget Lab in April.

Pros and cons of no tax on overtime

Supporters of tax exemptions for overtime pay say that it would help workers in low-wage and labor-intensive sectors like nurses or firefighters who often work extra hours. The tax exemption could also make bonuses, which are often tied to seasonal work, more rewarding.

Critics of the policy, like the Tax Foundation and The Budget Lab, say that it would create inequity in the tax code as workers making the same amount of income could face different tax burdens depending on the nature of their job. 

Tax Foundation also says that the exemption would create “perverse incentives.”

“By making tips and overtime tax-free, employers may feel less pressure to raise base wages, effectively shifting the burden of compensation onto tax policy rather than payroll,” wrote Abir Mandal, a senior policy analyst at Tax Foundation. “Employers might also restructure pay to favor bonuses or overtime over hiring additional staff, reducing job opportunities and encouraging overwork. Worse, high earners could exploit these exemptions by reclassifying income as tips or bonuses.”

When does no tax on overtime start in Massachusetts?

While the bill has passed the House, it must still clear the Senate and then return to the House if they make changes, which is likely.

It’s unclear when the Senate will vote on the bill, but the White House has requested a July 4 deadline for full passage.

The Massachusetts bill has only recently been filed and it’s unclear how it will fare in the legislature.

Contributing: Riley Beggin