No Tax on Tips Act
No Tax on Tips Act
Plain Language Summary
# No Tax on Tips Act Summary **What it would do:** This bill would allow workers to deduct up to $25,000 in tips from their taxable income each year. Currently, tips are considered taxable income but aren't deductible. The bill also expands a tax credit for employers who pay payroll taxes on employee tips, extending it to include beauty service workers. The deduction would only apply to cash tips that employees report to their employers, and workers earning over $160,000 annually wouldn't be eligible. **Who it affects:** The primary beneficiaries would be service industry workers who regularly receive tips—such as restaurant servers, bartenders, hairdressers, and similar workers.
Employers in these industries could also benefit from the expanded tax credit. The bill is narrowly targeted to moderate-income workers, as higher earners are excluded from the deduction. **Current status:** The bill (HR 482) was introduced by Rep. Vern Buchanan (R-FL) in the 119th Congress and is currently in committee, meaning it hasn't yet been debated or voted on by the full House. It remains in the early stages of the legislative process.
CRS Official Summary
No Tax on Tips ActThis bill establishes a new tax deduction of up to $25,000 for tips, subject to limitations. The bill also expands the business tax credit for the portion of payroll taxes an employer pays on certain tips to include payroll taxes paid on tips received in connection with certain beauty services.Under the bill, the new tax deduction for tips is limited to cash tips (1) received by an employee during the course of employment in an occupation that customarily receives tips, and (2) reported by the employee to the employer for purposes of withholding payroll taxes. (Under current law, an employee is required to report tips exceeding $20 per month to their employer.)Further, an employee with compensation exceeding a specified threshold ($160,000 in 2025 and adjusted annually for inflation) in the prior tax year may not claim the new tax deduction for tips.Finally, the bill expands the business tax credit for the portion of payroll taxes that an employer pays on certain tips to include payroll taxes paid on tips received in connection with barbering and hair care, nail care, esthetics, and body and spa treatments. (Under current law, an employer is allowed a business tax credit for the amount of payroll taxes paid on certain tips received by an employee in connection with providing, delivering, or serving food or beverages.)
Latest Action
Referred to the House Committee on Ways and Means.