Tip Tax Termination Act

# Tip Tax Termination Act Summary **What the bill would do:** The Tip Tax Termination Act would allow workers to exclude up to $20,000 in tips from their federal taxable income each year. This means tip earners would pay less in federal income taxes on that portion of their earnings. The bill would apply to workers in positions that typically rely on tips, such as restaurant servers, bartenders, hairdressers, and hotel staff. The IRS would need to adjust how it calculates tax withholding from paychecks to account for this exclusion.

However, the benefit would only last until 2030 unless Congress extends it. **Who it affects and key details:** This bill primarily benefits workers in service industries where tipping is common. The excluded tips would not count toward most tax deductions or credits, though there are exceptions for the Child Tax Credit and Earned Income Tax Credit, which could help lower-income families. The $20,000 annual cap means higher-earning servers or bartenders would only get partial tax relief. **Current status:** The bill was introduced by Representative Don Bacon (R-NE) and is currently in committee, meaning it has not yet been voted on by the full House of Representatives. It has not advanced further in the legislative process.