Senate Passes Bill to Throw Out Tax on Tips

President Trump's campaign promise to nix federal taxes on tips has just moved a step closer to becoming reality. On Tuesday, the US Senate gave the thumbs-up to legislation that would do just that, meaning the No Tax on Tips Act introduced by GOP Sen. Ted Cruz in January is now headed to the House, reports the Hill. The outlet notes that it's expected to pass that chamber "one way or another—be it via the stand-alone measure or Trump's 'big, beautiful bill' that will extend tax cuts." "The certainty that we will see no tax on tips become the law of the land, I think, is very close to 100%," Cruz said. "One way or another, no tax on tips is going to become law."

• Details: The bill would carve out a tax deduction worth up to $25,000 per tax year on cash tips—meaning actual cash, tips put on credit and debit cards, and checks—that workers report to their employers for withholding purposes, per the Washington Post. Only staffers who make less than $160,000 in 2025 would qualify, though that number will reportedly increase as time goes on. Restaurant servers, bartenders, and delivery drivers are among the occupations that could benefit most, per a statement from Dem Sen. Chuck Schumer.
• Bipartisan push: Among the bill's other supporters were Democratic Sens. Jacky Rosen and Catherine Cortez Masto, both from Nevada, a state where about a quarter of its workers are dependent on tips. "Nevada has more tipped workers per capita than any other state, so this bill would mean immediate financial relief for countless hardworking families," Rosen said, per NBC News. "I am not afraid to embrace a good idea, wherever it comes from."
• Wrinkles: The New York Times notes, however, that the ins and outs of the legislation could "get tricky," and that "the tax benefits may not go as far for low-income workers as many may think." Critics of the plan, for example, point out that only customer-facing workers are allowed to receive tips—meaning it could cause tension when back-of-the-house workers, like cooks and dishwashers, aren't receiving the same tax perks as other staffers. More pushback here.

(More tips stories.)