What Does 'No Tax on Tips' Mean? Exploring the Ramifications of the Recently Passed Bill

Understanding the nuances of taxes is a full-time job unto itself, yet every year we must partake in a labyrinthine process anyway. For hospitality and food industry workers, especially, understanding how to properly log, track, and report any tips that were earned in the previous year is a similarly laborious process.

That is, until now. A fascinating piece of legislation was just passed that holds many ramifications for those whose earnings depend predominantly on earned tips at work.

If you haven't yet learned about the nuances of this recently passed bill, you're in for an interesting read. Learn more below about why this bill was proposed, passed, and what it means going forward for those who earn tips at their place of work.

The phrase "No Tax on Tips" refers to the No Tax on Tips Act that the Senate passed with unanimous consent on May 20.

President Donald Trump popularized the command often during his presidential campaign, including at rallies held in Las Vegas in the ensuing months following his victory in the 2024 presidential election.

As NBC News reports, "The legislation would create a tax deduction worth up to $25,000 for tips, limited to cash tips that workers report to employers for withholding purposes on payroll taxes."

If you are an individual who receives tips at work but earns an annual salary of $160,000 or more, however, this newly passed bill will not apply to you. Though, as NBC News reports, the $160,000 threshold is expected to rise due to inflation over the coming years.

The bill was deemed a bipartisan successs, per The Washington Post, as it was originally introduced by Republican Senator Ted Cruz, and co-sponsored in part by Democratic Nevada Senators Jacky Rosen and Catherine Cortez Masto.

Indeed, it isn't so often that a bipartisan bill receives such immediate support, though as Sen. Rosen moved for "unanimous consent," she and her colleagues had to have high confidence that no other senators would object to the bill.

Just as rapidly as the bill was passed, other logistical considerations must also quickly take shape.

To wit: the clock is ticking, now, on the treasury, which "must publish a list of eligible occupations no later than 90 days after the measure's enactment," per The Washington Post.

In a statement posted by Senate Democratic Leader Chuck Schumer, the New York Senator gave a preview of the occupations we are likely to see acknowledged by the treasury.

"Working Americans— from servers, to bartenders, delivery drivers, and everything in between— work hard for every dollar they earn and are the ones who deserve tax relief, not the ultra-rich," Sen. Schumer said.

"While President Trump and Republicans push tax breaks for billionaires and stick the middle class with the bill, Senate Democrats are standing strong to protect America’s working families," Sen. Schumer concluded in his statement.

Per The Washington Post, ultimately, this move may not be the financial boon to employees that many hope it to be, and the lost revenue could reach $15 billion for the U.S. government.