President Trump's "Big Beautiful Bill" is drawing attention among service industry workers. The legislation allows waiters, bartenders, hair stylists, and millions of other tipped workers to deduct part of their tip income from federal taxes.
At the Country Gables Cafe in Roseville, waitress Jessica Burrus says the change could be a real relief.
"I paid $900 one time and it was kinda a big chunk of change," Burrus recalled.
Under the law, the first $25,000 of tips a worker earns, along with up to $12,500 in overtime pay, will be tax-deductible, so long as the worker's total income stays under $150,000 a year.
For many, the savings could be significant. Experts estimate the average worker who qualifies could save around $3,000 a year.
"It's exciting to see what the end of the year is going to look like," Burrus said. "Over the previous years, I've owed quite a bit, and so hopefully this can go in a college fund instead."
There's still a catch
While the new deduction will reduce federal income taxes, it won't eliminate other payroll taxes.
"They're still going to pay other taxes, whether it's state taxes, Social Security, or Medicare," explained Sanjay Varshney, Professor of Finance at Sacramento State. "But they can deduct a certain amount from tips and overtime when calculating what's taxable."
David Thao, who owns Country Gables Cafe, says anything that helps workers keep more of what they earn is welcome.
"No taxes, that's pretty good for my employees, and they generate quite a bit of tips, so it's going to help them a lot," Thao said.
Who benefits most?
Nationwide, around four million people, roughly 2.5% of American workers, earn tip income. More than a third of them already make too little to pay federal income taxes, but for those who do, the new deduction could add up quickly.
The law takes effect immediately, applying even to tips workers have already received this year.
For many service workers, it means a little more financial breathing room and the chance to save for things like college, retirement, or just everyday expenses.
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