What does ‘no tax on tips' mean? A look at the new bill and its impact on workers and businesses
The Senate on Tuesday unanimously passed President Donald Trump's 'No Tax on Tips' Act in a 100-0 vote. The bill allows workers to deduct 100% of their reported tips, including those received in cash, by credit or debit card, or by check, from their federal income taxes.
The tax break would be temporary, lasting through 2028, and would apply to employees and independent contractors in jobs where tipping is common, such as restaurant and hospitality workers. Workers earning $160,000 or more in 2025 would not be eligible.
As per the bill, employers can get a tax credit for payroll taxes paid on tips in beauty and personal care jobs, such as hair, nails, and spa services. This adds to the current credit for tips in food and beverage jobs. However, the Treasury Secretary will determine the full list of qualifying occupations.
Following the bill's passage, Senator Ted Cruz issued a statement:
'President Trump made a promise to the American people that he would eliminate taxes on tips. In Congress, I formed a bipartisan, bicameral coalition to get that done, and in the Senate introduced the No Tax on Tips Act."
'Today, I went with Senator Rosen to the floor to secure Senate passage of the bill. This legislation will have a lasting impact on millions of Americans by protecting the hard-earned dollars of blue-collar workers, the very people who are living paycheck-to-paycheck. I urge my colleagues in the House to pass this important bill and send it to the President's desk to be signed into law,' he added.
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