No Tax on Tips Act
Sponsored By: Senator Cruz, Ted [R-TX]
Passed Senate
Summary
Creates a new tax deduction for cash tips up to $25,000. It also extends an employer payroll-tax credit to tips earned from barbering, hair and nail care, esthetics, and body and spa treatments.
Show full summary
- Workers who earn tips must report cash tips to their employer for payroll withholding to qualify, and only occupations that customarily received tips on or before Dec 31, 2023 are eligible. Employees whose prior-year compensation exceeded $160,000 in 2025 (adjusted for inflation) cannot claim the deduction.
- Employers in beauty services such as barbering, hair care, nail care, esthetics, and body and spa treatments would be able to claim the existing payroll-tax credit for the portion of employer-paid payroll taxes on tips, similar to food and beverage businesses.
- The Treasury must publish a list of qualifying occupations within 90 days after enactment and the changes would apply to tax years beginning after Dec 31, 2024.
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Bill Overview
Analyzed Economic Effects
2 provisions identified: 2 benefits, 0 costs, 0 mixed.
New tax break for tipped workers
This bill would let you deduct up to $25,000 of cash tips you report to your employer each year. It would only apply if your job is on a list of occupations that customarily got tips on or before December 31, 2023; the Secretary would publish that list within 90 days of enactment. You could not claim it if, last year, you earned above the IRS “highly compensated employee” pay threshold from the same employer. You could take this deduction even if you use the standard deduction; itemizers would not treat it as a miscellaneous deduction and it would count under any overall itemized deduction limit. IRS withholding would be adjusted to reflect this deduction. If enacted, it would start for tax years beginning after December 31, 2024.
Employers get tip credit for beauty services
This bill would let beauty service businesses claim the employer Social Security tip credit. Covered services would include barbering and hair care, nail care, esthetics, and body or spa treatments. The credit would apply only where tipping is customary. For food and drink businesses, the 2007 baseline rule would still apply. If enacted, this would start for tax years beginning after December 31, 2024.
Sponsors & CoSponsors
Sponsor
Cruz, Ted [R-TX]
TX • R
Cosponsors
Sen. Daines, Steve [R-MT]
MT • R
Sponsored 1/16/2025
Sen. Rosen, Jacky [D-NV]
NV • D
Sponsored 1/16/2025
Sen. Ricketts, Pete [R-NE]
NE • R
Sponsored 1/16/2025
Sen. Cortez Masto, Catherine [D-NV]
NV • D
Sponsored 1/16/2025
Sen. Hawley, Josh [R-MO]
MO • R
Sponsored 1/16/2025
Sen. Scott, Rick [R-FL]
FL • R
Sponsored 1/16/2025
Sen. Cramer, Kevin [R-ND]
ND • R
Sponsored 1/16/2025
Sen. Marshall, Roger [R-KS]
KS • R
Sponsored 1/27/2025
Roll Call Votes
No roll call votes available for this bill.
View on Congress.gov