Trump’s Tax Cuts Gives Breaks to Tipped Workers, Overtime Workers, Seniors, & Business Owners, but White Collar Workers with College Degrees Don’t Benefit

Happy Tax Day! LOL, yeah right! Here is the breakdown of what the new tax code means.

Trump signed the One Big Beautiful Bill Act on July 4, 2025. The law expanded or created deductions for 5 specific groups: workers who earn tips, workers who earn overtime, retirees over 65, small business owners, and investors. Salaried workers who earn a fixed paycheck got none of them.

The breaks for tipped workers, overtime workers, and seniors are all temporary. They expire in 2028. The 20% deduction for business owners is permanent.

The math at $80,000 makes it concrete. 4 workers all earning $80,000 a year now owe very different amounts to the IRS. A high school teacher on a salary owes about $15,600 in federal taxes. A restaurant server earning the same $80,000 (including tips) owes about $10,700. A police officer earning the same $80,000 (including overtime) owes about $12,800. A retired electrician collecting $80,000 in pensions and Social Security owes about $5,000.

The gap gets wider at the top. At $1 million in income, a salaried banker can owe the IRS more than $300,000. A business owner earning the same $1 million can owe around $240,000 thanks to the permanent 20% deduction on qualified business income. An investor earning $1 million through long-term capital gains can owe around $200,000. A venture capitalist who structures the same $1 million through qualified small business stock can legally bring the bill to $0 if the shares were held for 5 or more years.

Professionals like doctors, lawyers, accountants, consultants, and financial advisors are explicitly excluded from the 20% business income deduction, even when they own their own practices. The law treats a doctor running a medical office differently than a plumber running a plumbing business at the same income level. Both own small businesses. Only one gets the break.

The tips and overtime deductions come with hard caps, occupation limits, and income phaseouts. The Tax Policy Center estimates roughly 3% of households qualify for the tips deduction and about 9% qualify for the overtime deduction. For those who do qualify, the savings are real. A CPA on Long Island told Bloomberg her clients are “starting to come up for air.” A small business owner in Wisconsin called the 20% deduction “huge.”

The cost of the tips and overtime deductions combined through 2028 is about $122 billion. The cost of making the 20% business income deduction permanent is roughly $737 billion over 10 years. The temporary breaks that help servers and cops cost the government a fraction of what the permanent break for business owners costs.

College graduates have voted for Democrats in the last 3 presidential elections by an average of 20 points, according to the Pew Research Center. Americans without bachelor’s degrees have favored Trump by an average of nearly 10 points over the same period. The 2024 election widened that gap further. The tax code now reflects the divide.