Ever since July 4th, when President Trump signed the One Big Beautiful Bill (OBBB) into law, you’ve probably seen posts on social media, heard stories from friends, or even wondered:
- “When will my paycheck change?”
- “Do I have to pay taxes on tips anymore?”
- “Am I getting that overtime money back?”
Unfortunately, there’s a lot of confusion out there. Headlines and TikToks aren’t always accurate, and well-meaning friends may be spreading half-true advice.
Patrick Accounting is here to clear things up. This guide explains:
- What OBBB actually changes (and what it doesn’t)
- When you might see tax benefits
- How to avoid surprises when you file
Your Paycheck Is Not Changing Automatically
The number one thing you need to understand is that your paycheck isn’t going to change right away because of OBBB.
Even if you’ve seen “no tax on tips” or “no tax on overtime” trending, here’s what’s really happening:
- The new tax breaks are deductions on your tax return, not changes to what’s withheld from your paycheck.
- You can deduct up to $12,500 in overtime if you file as a single taxpayer.
- You can deduct up to $25,000 in tips per taxpayer.
- These are deductions, not credits. That means they reduce your taxable income, not the exact amount of tax you owe.
Think of it this way: If you usually get a $2,000 tax refund, you might now get $2,500 or $3,000. But your paycheck stub will look exactly the same unless you make changes to your W-4 form.
Common Questions About the OBBB
Here are some of the questions we’ve been hearing.
“When will I see more money on my paycheck?”
You won’t see an automatic change. The tax benefit shows up when you file your tax return next year.
If you want to see some of that benefit sooner, you can update your W-4 form and claim your expected deductions under “other deductions.”
“Do I need to do anything special to get the tax breaks?”
Not during the year. Your employer will track your overtime and tip income and report it on your W-2.
When you file your tax return, your tax preparer will use that information to claim the deductions for you.
“I heard I don’t have to pay taxes on tips anymore. Is that true?”
Not exactly. You’ll still see Social Security and Medicare taxes taken out of your tips.
The benefit comes at tax time. You’ll be able to deduct up to $25,000 in tip income from your taxable income.
“My friend said they’re getting an extra $12,500 back. Will I?”
Not quite. That’s not how it works. These are deductions, not dollar-for-dollar refunds.
If you earn $12,500 in overtime, you might save $1,250–$3,750 in federal income tax, depending on your tax bracket, but it’s not a $12,500 check.
How to See the Tax Benefit Before Next Year
If you don’t want to wait until you file your taxes to see any impact, you can update your W-4 form.
Here’s how it works:
- Estimate how much you’ll make in overtime or tips this year.
- Fill out a new W-4. Look for the “other deductions” section.
- Enter your estimate (up to $12,500 in overtime or $25,000 in tips).
- Submit the W-4 to your employer. Your paycheck may go up slightly as less federal tax is withheld.
Be careful with your numbers and estimates. If you guess too high, you could end up owing tax when you file your return. If you’re unsure, it’s safest to wait and claim the deductions at tax time.
What to Expect From These Tax Breaks
Here’s what these deductions actually mean for you:
Overtime deductions
- Max deduction: $12,500
- Likely tax savings: $1,250–$3,750 depending on your tax bracket
- Social Security & Medicare taxes still apply
Tip deductions
- Max deduction: $25,000
- Likely tax savings: $2,500–$7,500 depending on your tax bracket
- Social Security & Medicare taxes still apply
These are meaningful savings, but they’re not life-changing. Most people will see a few hundred to a few thousand dollars in extra tax savings, not massive refunds.
Moving Forward With Confidence
The One Big Beautiful Bill brings real tax benefits for employees who earn a lot in overtime or tips. But the way those benefits show up is different from what many people expect.
Here’s the simple version:
- Your paycheck won’t change automatically.
- You’ll see the tax savings when you file your return (unless you change your W-4).
- The savings are meaningful but not giant cash windfalls.
If you have questions about your specific situation, talk to a qualified tax preparer.
