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S129119th CongressWALLET

No Tax on Tips Act

Sponsored By: Senator Cruz, Ted [R-TX]

Passed Senate

Summary

Would create a new tax deduction that removes federal income tax on many cash tips, capped at $25,000 per taxpayer. It would also expand the employer payroll-tax credit to cover many beauty services like barbering, hair care, nail care, esthetics, and body and spa treatments.

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  • Many tipped workers would be able to deduct up to $25,000 in reported cash tips when they file. Employees with prior-year compensation above $160,000 in 2025 would not qualify for the deduction.
  • Salons, barbershops, spas, and similar businesses would be eligible for the business tax credit for the employer share of payroll taxes on tips, matching the existing credit for food and beverage services.
  • The Treasury would have 90 days to publish a list of occupations that customarily receive tips as of Dec. 31, 2023, withholding tables must be adjusted to reflect the deduction, and the changes 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.

Deduction for cash tips up to $25K

If enacted, you would be able to deduct up to $25,000 each year of cash tips you reported to your employer. This would reduce your taxable income even if you do not itemize. Your job would need to be on a Treasury list of occupations that customarily received tips by December 31, 2023. You would not qualify if, from the same employer, you earned above the IRS highly compensated employee pay limit last year. IRS would update paycheck withholding to reflect the deduction. Itemized deduction caps would not reduce this deduction. This would apply to tax years beginning after December 31, 2024, and Treasury would publish the occupations list within 90 days of enactment.

Tip credit extended to beauty services

If enacted, employers could claim the existing Social Security tip credit for tips from beauty services when tipping is customary. Beauty services would include hair, barbering, nails, esthetics, and body or spa treatments. The credit already covers food and drink tips and would keep that. For food and drink businesses, the 2007 minimum wage reference would still apply; other services would use the current minimum wage to figure the credit. This would apply to 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
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