"I Was Wrong, Kinda": The No Tax On Tips Bill Passed!

was wrong, I’ll admit it.  I never in a million years thought this would actually come into fruition.

 I mean, we’re not there yet, but it’s looking like a real possibility.

I’ll give it to the orange man for at least trying.

But what does this mean for tipped workers? 
Is it only cash tips?  Who benefits?  Who loses?  Will it pass?

This could put more money in your pocket. But not everyone wins. And it’s not quite what it sounds like.

Let’s break it all down in food and beverage terms.

So here’s how we got here: Donald Trump first proposed eliminating federal income taxes on tips during a campaign rally held on June 9, 2024 in Las Vegas, Nevada.

The idea began getting traction along the trail, so much that in 2024,

Kamala Harris surprised people by saying she’d support a version of the idea too.

Suddenly, it wasn’t just a partisan pitch.

In states with big service industry populations, people on both sides started paying attention.

As the pandering for votes continued.

The Meat:

Senator Ted Cruz (R-TX) introduced the No Tax on Tips Act (S.129) on January 16, 2025.

On May 20, 2025, the U.S. Senate unanimously passed the bill with a 100–0 vote.

Which is extremely unusual;

While it was anticipated that at least one senator would object,

given the bill’s implications and its association with President Trump’s campaign promises.

The vote stemmed from the use of a unanimous consent procedure typically reserved for non-controversial legislation.

Brought the bill to the floor, and no senator objected, allowing it to pass without debate.

And boom.

But hold up—it’s not law yet. Just because the Senate passed it doesn’t mean it’s official.

For this bill to become law, it still needs to pass the House of Representatives and then be signed by the President.

1. Pass the House of Representatives (Republicans hold a slim majority: 221 out of 435 seats).

2. Be signed by the President, (Trump is currently president, so odds are in its favor if the House passes it).

Now let’s talk about what this would actually do if it makes it all the way.

So if this becomes law, here’s what you need to know:

• • You’ll still have taxes withheld from your tips.
  • Your employer will continue to withhold taxes on reported tips just like they should be doing already. That doesn’t change. This bill gives you the break later, when you file your taxes.

You’d get a deduction of up to $25,000 not tax-free income.

• • This is a deduction, not free money. If the bill passes, you’ll be able to deduct up to $25,000 of your reported tips from your taxable income as long as:
  • You earned less than $160,200 from that employer in the previous year.
  • You properly reported your tips to your employer.

What counts as a “cash tip“?

• •  The IRS defines “cash tips” more broadly than just dollar bills:
  • Tips received directly from customers.
  • Tips paid in physical cash, or through credit cards, debit cards, Venmo, PayPal, Cash App, Zelle etc.
  • Tips pooled or shared with you from coworkers.
  • Tips distributed by your employer that were originally paid electronically by guests.

Who Benefits ?

• • Servers
  • Bartenders,
  • Barbacks Bussers,/SA’s
  • Valets (depends on employment status see grey areas below)
  • Hairdressers
  • Nail techs
  • Tattoo artists
  • Hotel porters

… basically anyone who earns a significant portion of their income through tips and properly reports them.

While the IRS doesn’t give an exact number, “significant” usually means 20% or more of your income from tips.

For most F&B folks, it’s more like 50–90%.

If you live in a tip credit state (where your boss can legally pay you less than minimum wage because they assume you’ll make it up in tips),

this bill might finally give you a break at tax time.

But heads up, this also makes it less likely those states will raise the base wage for tipped workers anytime soon.

There are still grey areas valets and delivery drivers in particular.

If you’re an independent contractor or work through an app, you probably don’t.

If you report your tips to an employer, you probably qualify.

Who doesn’t benefit?

• Back of house (BOH) employees like line cooks and dishwashers,
  who keep the whole place running—get nothing from this.
  Zero. Zilch. As usual.
  Which is even more frustrating because this isn’t technically a “no tax on tips” bill
  it’s a tax deduction that only helps those who report enough to matter.

• Gig workers like Uber drivers and Instacart shoppers who don’t report tips to an employer.
  Which really sucks as they very much do deserve this credit.

• Valet drivers and delivery workers-? still unclear.
  Grey areas about whether they qualify if they’re not considered traditional tipped employees or are paid through third parties.

• Anyone who earns above $160,200 from a single employer.

• Anyone who doesn’t report their tips.

• Shady employers trying to game the system might think they can sneak through with fake tip amounts, but the IRS will likely be watching.

Do employers benefit?

In some ways, yes. If tipped workers feel more confident reporting tips, overall payroll tax math could shift in subtle ways.

But there’s no direct employer credit built into this bill, it’s geared toward employees.

How Much will It Really Help?

For some workers, this bill could make a noticeable difference, others, not so much.

It all depends on your filing status and overall income.

Let’s look at a couple of simplified examples:

• Single/Restaurant worker/ $50,000/year with $10,000 in reported tips.

  • 10% withheld = $5,000

  • Takes the standard deduction = $14,600

  • Taxable income without the bill = $50,000 − $14,600 = $35,400 → Estimated tax = ~$4,000

  • Taxable income with $25K deduction = $50,000 − $14,600 − $10,000 = $25,400 → Estimated tax = ~$2,500

  • Savings: $1,500 (Plus possibly a refund depending on credits and withholding)

• Single /Server / $35,000/year with one child

  • 10% withheld = $3,500

  • Standard deduction = $14,600

  • Child Tax Credit = $2,000

  • Without the bill → Taxable income = $20,400 → Tax owed = ~$1,500 → With credit = almost $0

  • With the bill → Taxable income = $20,400 − $10,000 = $10,400 → Tax owed = ~$750 → Refund of $2,750

But Wait,  What About FICA and State Taxes?

• • This only applies to federal income tax.

  • You’ll still pay state tax (unless you live in a state with no income tax).

  • You’ll still pay FICA taxes (Social Security & Medicare) on all reported tips.

    FICA is the money that gets taken out of your paycheck to fund Social Security and Medicare. Everyone pays it—tipped or not. Even with this new bill, you still owe it on all reported tips.

    That’s actually a good thing—because the more you pay into Social Security, the more you’ll eventually get back if you retire or need disability benefits.

Criticism and Pushback

Not everyone’s thrilled. Economists and labor advocates have argued this bill may do more harm than good:

• • It could incentivize the expansion of tipped work while undermining wage increases.

  • Advocates argue that eliminating sub-minimum wages would be more impactful.

  • “According to Brookings, 37% of tipped workers already don’t pay federal income tax due to low earnings. So this bill might not help them at all.”

So this would do little or nothing for them

Final Steps Before It Becomes Law

This bill passed the Senate on its own, and it’s now part of a bigger tax plan called the “One Big Beautiful Bill.”

That big bill barely passed the House, and now the Senate is reviewing it.

Some senators want to make changes, so it might take a few more rounds.

Trump wants it signed by July 4, so if all goes smoothly, it could become law this summer.

Either way, the “No Tax on Tips” part has strong support and will likely pass whether by itself or as part of the bigger bill.

So yeah, it’s not exactly no tax on tips.

If it were truly that, there wouldn’t be a $25K cap.

I make around 85 percent of my income from tips, like most of us and I will probably benefit a little.

But let’s be real: this bill helps those who earn the most in tips.

The ones scraping by at the bottom?  Not so much.

And it’s a deduction, not a refund. I wish they had included something for BOH workers too.

That said, I’ll admit I won’t be mad at a few extra dollars back at tax time.

It’s something, not nothing,

Though I ponder of something great that could truly make a difference for everyone in our industry