When does 'no tax on tips' begin? Latest moves made on Trump's campaign promise
On May 20, the United States Senate passed a bill to eliminate taxes on overtime, but the change may not happen for a while.
Sen. Ted Cruz, R-Texas, introduced the bill in January, which was brought up for a voice vote by Sen. Jacky Rosen, D-Nevada. It passed with unanimous consent – a rare occurrence for substantive legislation.
The deduction would apply to cash tips worth up to $25,000. People who earn up to $160,000 could claim it, and the amount would rise along with inflation. Ending taxes on tips would cost around $110 billion in federal revenues over the next 10 years, according to estimates by the center-right Peter G. Peterson Foundation.
Here is what to know about the move from the Senate.
The House has been working to pass the One Big Beautiful Bill Act, which includes eliminating tips and overtime taxes. In the meantime, the Senate passed its own bill to remove taxes on tips.
In a surprise move on May 20, the Senate passed the "No Tax on Tips Act", which now heads to the House for their vote. Here's what it includes:
Tax deduction for tips worth up to $25,000: This is limited to cash tips that workers report to employers for withholding purposes on payroll taxes.
It is restricted to those who earn $160,000 or less in 2025, but this will change with inflation in the coming years.
"Whether it passes free-standing or as part of the bigger bill, one way or another, 'No Tax on Tips' is going to become law and give real relief to hard-working Americans," said Republican Sen. Ted Cruz, one of the senators who proposed the bill. "So I'm proud of what the Senate just did, and I commend Democrats and Republicans, even at a time of partisan division, coming together and agreeing on this commonsense policy."
If passed by the House, the Senate's No Tax on Tips Act could remove the no-tax-on-tips part of Trump's larger sweeping bill that the House is working on to pass through faster.
Since the bill has to go to the House after the Senate, there is no clear timeframe when the tax cuts could begin. However, the budget bill the House is working to pass would apply to paychecks between 2026 and 2034. The Senate's No Tax on Tips Act would likely not have a deadline like the House budget bill.
It is important to note that the Senate's Act only applies to taxes on tips. If only the Senate bill is passed, taxes on overtime will still exist. The House Bill would have to pass both the House and the Senate for taxes on overtime to go away.
There's no actual timeline for when the spending bill must be approved before the fiscal year begins.
The House of Representatives must pass all budget bills by June 30. However, Congress has no official deadline other than the Oct. 1 beginning of the fiscal year.
Both sides of legislation have deadlines throughout the year to progress through the budget, but only the House has a deadline for the final budget.
Once Congress and the House pass the budget bill, it will be sent to the president's desk, where he has 10 days to sign it.
In the 119th Congress, there were 53 Republicans, 45 Democrats and 2 Independents in the U.S. Senate, and the GOP held a two-seat edge in the House of Representatives. Races were held this year to fill seats vacated by Republicans Matt Gaetz and Michael Waltz, both of whom resigned to take appointments in the Trump administration, though Gaetz never assumed his role.
The Senate requires a 60-vote majority to pass the bill, meaning we may see a close voting margin, similar to the one in the House earlier this year.
This article originally appeared on Memphis Commercial Appeal: Senate passed no taxes on tips bill. What happens now? What to know
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