No tax on tips is an American proposal to not tax income earned fromtips. During the2024 United States presidential election, both main candidates supported legislation to remove federal taxes from tips.
On May 20, 2025, theUnited States Senate passed the bipartisanNo Tax on Tips Act proposed bill byunanimous consent.[1] A version of the bill was included in theOne Big Beautiful Bill Act and signed into law on July 4, 2025.[2]
At the federal level, several bills have been proposed to reduce or eliminate taxes on tips.[3] The proposal is also being considered in at least 20 states.[4]
The proposal was supported by bothDonald Trump andKamala Harris in the 2024 United States presidential election.[5] TheNational Restaurant Association has also expressed support for the proposal.[6]
The proposal gives priority to tipped workers and leaves out the vast majority of Americans who are not in tipped occupations.[7][8]
Some tipped workers have incomes so low that they do not owe federal income tax.[8][9] If customers perceive workers take home a greater share of their tips, they could tip less.[10]
The focus on taxes on tips could also distract from raising thetipped anduntipped minimum wages and reduce pressure on employers to raise wages.[4][10][11]
The proposal could lead more industries to relymore on tipping which is widely unpopular.[12][13]
The proposal could also enabletax avoidance as income is represented as tips such as bonuses or commissions earned by hedge fund managers.[4][14][15]
If the proposal only covered federal income tax, it would not affect many low-wage workers that pay more in payroll tax than in income tax. By contrast, if the proposal includedpayroll taxes, workers could lose access to Social Security and Medicare benefits.[9] Tips could also be excluded from wages, resulting in workers receiving reducedunemployment benefits.[4] Reduced taxes would also lead to a loss of tax revenue.[4][12][14]
the No Tax on Tips Act is deeply flawed; it would leave out the more than 95 percent of low- and moderate-wage workers who are not in tipped occupations
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