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119-hr-6295119th CongressWALLET

The Working for Tips Tax Relief Act of 2025

Sponsored By: Representative Davis, Donald G. [D-NC-1]

Introduced

Summary

This bill would create a temporary, targeted tax break that lets many tipped workers exclude part of their cash tips from taxable income. It would set a $35,000 annual cap, income-based phaseouts, and new reporting and review rules over a limited multi-year window.

Show full summary
  • Workers: Tipped employees could exclude employer-reported or Form 4137-reported "qualified tips" up to $35,000 a year, with the deduction phasing out between $50,000 and $75,000 modified adjusted gross income for individuals and between $100,000 and $150,000 for joint filers.
  • Filers and employers: Claiming the deduction requires a Social Security number and married couples must file jointly to use it; employer tip statements and tip-reporting on individual returns determine eligible amounts.
  • Administration and timeline: The main provision applies to taxable years beginning after December 31, 2025 and expires after the taxable year beginning December 31, 2028. The Secretary must publish a list of occupations that customarily received tips, review living wage estimates and may adjust thresholds, and report to Congress every two years starting July 1, 2027.

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Bill Overview

Analyzed Economic Effects

2 provisions identified: 1 benefits, 0 costs, 1 mixed.

New tip tax break for workers

This bill would create a new above-the-line deduction that lets you deduct up to $35,000 of qualified cash tips each year. The deduction would phase out by $50 for every $500 of modified adjusted gross income between $50,000 and $75,000 for single filers, and between $100,000 and $150,000 for joint filers; no deduction would be allowed above $75,000 ($150,000 joint). Only cash tips from jobs on a Treasury-published list would qualify, and married taxpayers could only claim the deduction on a joint return. You must include a correct Social Security number to claim it; leaving it off would be treated as a math or clerical error. Treasury would publish the tipped-occupation list within 90 days and would review living-wage data every year and would be permitted to adjust thresholds. Employers' withholding rules would be changed for tax years starting after December 31, 2025 to reflect the deduction, and payors would be allowed to use a Treasury-specified reasonable method to separate cash tips reported before January 1, 2026. The rules would apply for tax years beginning after December 31, 2024 and ending December 31, 2026, and when this section expires Treasury would start a pilot to study making the change permanent.

Tips count toward pass-through deduction

This bill would let owners of pass-through businesses and sole proprietors treat amounts deducted under the new tip deduction as excluded from Qualified Business Income. That would raise the 199A pass-through business deduction for eligible filers for tax years starting after December 31, 2024 through December 31, 2026.

Sponsors & CoSponsors

Sponsor

Davis, Donald G. [D-NC-1]

NC • D

Cosponsors

  • Rep. Soto, Darren [D-FL-9]

    FL • D

    Sponsored 10/9/2026

Roll Call Votes

No roll call votes available for this bill.

View on Congress.gov
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