No Tax on Tips Act: What to know about the bill and what comes next
The Senate on Tuesday passed a bill that would eliminate federal taxes on tips, advancing a key campaign promise of President Trump's, with the help of Senate Democrats.
Sen. Jacky Rosen (D-Nev.) brought the No Tax on Tips Act to the floor with the expectation that it would be blocked, but Sen. Ted Cruz (R-Texas), the sponsor of the bill, declined to do so. The bill passed via unanimous consent, a move typically reserved for routine legislative matters.
The legislation now heads to the House of Representatives.
Here's what to know about the bill:
Trump debuted his proposal to exempt tips from federal taxes at a rally in Nevada in June, and the issue became a key talking point on the trail as a way of courting working-class voters.
Polling suggests the proposal has nationwide support, but the policy gained significant traction in Nevada, which has the most per-capita tipped workers of any state in the nation. Roughly 25 percent of Nevada workers rely on tips, according to the state's senators, Rosen and Sen. Catherine Cortez Masto (D-Nev.), who are co-sponsors of the legislation.
Trump has pointed to the policy's popularity among service and hospitality workers as a big factor in his November victory in Nevada, which flipped red for the first time in decades.
In January, Trump took a victory lap in the battleground state and thanked Nevada voters for delivering the state to him, promising to uphold his commitment to eliminating taxes on tips.
'In the coming weeks, I'll be working with Congress to get a bill on my desk that cuts taxes for workers, families, small businesses, and, very importantly, keeps my promise for a thing called …. no tax on tips,' Trump said to a crowd, in his first visit to Nevada since taking office.
'So if you're a restaurant worker, a server, a valet, a bellhop, a bartender, or one of my caddies — I go through caddies like candy, if I play badly, I always blame my caddy — or any other worker who relies on tipped income, your tips will be 100 percent yours,' he continued.
The bill amends the Internal Revenue Code to create a federal income tax deduction for cash tips — including those given by credit/debit card or by check.
Employees would be able to claim a 100 percent income tax deduction for amounts of up to $25,000 each year, but only tips reported to the employer would be eligible for the deduction.
The exemption would apply to tips given to workers 'in an occupation which traditionally and customarily received tips on or before December 31, 2023,' according to the legislation. The Treasury secretary would be required to produce a list of occupations that fit that description within 90 days of the bill's passage.
The deduction only applies to individuals earning less than $160,000 per year, adjusted annually for inflation.
The bill, if passed in the House and signed into law in its current form, would take effect for all taxable years after 2024.
The bill needs to be approved by the House, which is focused on negotiating Trump's massive legislative package, the One Big Beautiful Bill Act.
That tax and spending bill includes a provision of the No Tax on Tips Act, but it's unclear whether it will remain a provision in the larger bill when the final version is produced. House Republicans could also take up the legislation as a standalone bill, which would be more likely to garner bipartisan support.
Democrats have pushed for the legislation to be decoupled from the larger bill, which still faces significant hurdles as some GOP holdouts continue to push against particular issues. That bill also faces a tough road ahead in the Senate.
Rosen called on Republicans to pass the bill in the House 'as soon as possible, without any poison pills.'
'The problem is that House Republicans have included a version of the No Tax on Tips Act in their bigger budget bill, a bill that cuts Medicaid, SNAP, and other programs families rely on to give more tax breaks for billionaires and the ultra-wealthy,' she said in a statement.
'We shouldn't be forcing working families to choose between keeping their health care or keeping their tips, which is why we want this bipartisan bill on its own — on its own — not part of a harmful, extreme budget bill,' she added.
Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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