New Tax Law Changes for Federal Income Taxes

With the introduction of President Trump’s new tax law, there will be reductions in federal income taxes related to tips and overtime. This will provide qualified individuals the ability to deduct certain overtime hours.

A business professor from Drake University, Matthew Mitchell, provided some insight into the bill’s purpose. “The core idea here is straightforward. It aims to let workers keep more of what they earn, particularly for those putting in extra hours and relying on tips.” For individuals, the deductions can reach up to $12,500, while married couples filing jointly can claim up to $25,000. These deductions will apply to income earned between 2025 and 2028.

In Des Moines, for example, Maro Restaurant’s servers, like Saravoice, have welcomed these changes. “Some of us are still earning around $4 per hour, so it’s a relief to know that at least part of that won’t be taxed away,” Boyce noted.

However, the Congressional Budget Office has predicted that this bill could contribute an additional $3.4 trillion to the federal deficit over the next ten years, potentially affecting millions without health insurance.

“In many ways, it’s a case of giving with one hand and taking away with the other,” Mitchell remarked. While workers will still have federal taxes withheld from their tips and overtime pay, they will be eligible to claim these deductions when they file their federal tax returns the following year. It’s also important to note that this change does not affect state taxes.