No Tax on Tips FAQ: Who’s Eligible, When It Starts and More

May 22, 2025 - By 4idiotz

Article Summary

A bipartisan bill, named the “No Tax on Tips Act,” passed the Senate on Tuesday, aiming to end federal income tax on tips. The bill still requires approval from the House and the President’s signature to become law. If enacted, it would offer a 100% deduction on qualifying tips for tax years after Dec. 31, 2024, capped at $25,000 per year. Eligible occupations include food and beverage industry workers, as well as tipped beauty service professionals.

What This Means for You

If you’re a tipped worker in the eligible occupations, this bill could provide tax relief with a 100% deduction on qualifying tips for tax years starting in 2025.
The bill addresses the discrepancies in taxation between cash and credit card tips, as it applies to both types of transactions.
Although there are concerns about the fairness and potential impact on tipping behavior, the “no tax on tips” policy is generally popular due to the need for tax relief among various groups of Americans.
Stay informed about the progress of this bill and consult with a tax professional to understand the implications for your specific situation.

Original Post

The Senate passed a bipartisan bill, the “No Tax on Tips Act,” ending federal income tax on tips. The bill still needs approval in the House and the President’s signature. If enacted, the bill offers a 100% deduction on qualifying tips for tax years after Dec. 31, 2024, with a $25,000 cap. Eligible occupations include food and beverage workers and those in tipped beauty services.

No tax on tips 2025: When will it start?

Bipartisan support exists, but the bill must pass through the House and receive the President’s signature. If successful, the change would deliver immediate tax relief through a 100% deduction on qualifying tips for tax years after Dec. 31, 2024, including the current tax year (2025).

What occupations would qualify for the no tax on tips deduction?

The bill covers most workers who currently receive tips and aims to prevent tax dodging in industries where tips haven’t traditionally been given. Eligible occupations include food and beverage workers and tipped beauty service professionals, with an individual compensation limit of less than $160,000 in 2025.

Do credit card tips count?

The Senate bill lets workers deduct 100% of qualifying tipped income, including tips from cash, debit, and credit card transactions, addressing complaints around uneven taxation of cash versus credit card tips.

Will the “no tax on tips” policy work?

The bill has critics who question the fairness and potential impact on tipping behavior. However, it is generally popular due to the need for tax relief among various groups of Americans.