Latest news with #NoTaxonTipsAct
The Hill
08-07-2025
- Business
- The Hill
How no taxes on tips could impact you
(NEXSTAR) — Among the multiple provisions within the bill President Donald Trump signed last week are several that could directly impact you, like changes to the child tax credit, a tax deduction for seniors, and no taxes on overtime pay. Another aspect that could put more money in your pocket will depend on where you work — and how you're paid. If you receive tipped wages, up to $25,000 will be tax deductible starting this year and running through 2028. The maximum deduction is available to those who have an income of $150,000 or less, or up to $300,000 for those filing jointly. This also only applies to federal income taxes, which means those who don't make enough to pay federal income taxes won't benefit from the deduction, according to The Wall Street Journal. Additionally, it will only apply to certain professions. The Treasury has to provide a list of those qualifying jobs within three months, WSJ reports. Tips are currently considered taxable. The cap on the amount of tipped wages that are tax deductible was added to the bill by the Senate, and received pushback from some, including Rep. Alexandria Ocasio-Cortez (D-N.Y.). She called the cap a 'scam,' pointing to other cuts in the megabill that could raise taxes for some and strip their SNAP, Medicaid, or insurance. Rep. Lloyd Doggett (D-Texas) shared similar sentiments about the bill passed by the GOP-led Senate, saying, 'These little flourishes that were added, like no tax on tips, are issues that are designed to cover the horrible job that they're doing.' Trump and former Vice President Kamala Harris campaigned on tax-free tips last year, and the Senate passed the 'No Tax on Tips Act' earlier this year, which received bipartisan support. The Finance Committee specified that 'cash tips' qualify but said the term applied to tips paid in cash, charged to credit cards or received from other employees under a tip-sharing arrangement. The National Restaurant Association, a trade organization that represents nearly 500,000 U.S. restaurants and bars, applauded the House's passage of Trump's spending bill — which did not cap the amount of tax deductible tipped wages — and said it wants to see tax-free tips. The association estimates the measure would benefit more than 2 million servers and bartenders. But the U.S. restaurant industry has more than 12 million workers, including dishwashers and chefs, according to government data. The Independent Restaurant Coalition said last month the 'no tax on tips' proposal leaves out too many of those workers. Others have instead called for Congress to take up a separate bill introduced by Nevada Democrat Steven Horsford that would eliminate taxes on tips but also require restaurants to pay workers at least the federal minimum wage of $7.25 per hour. In 43 states, restaurants are currently allowed to pay tipped workers much less, in some cases as little as $2.13 per hour. The Associated Press contributed to this report.
Axios
08-07-2025
- Business
- Axios
Trump's "big, beautiful bill" stops short of "no tax on tips" promise
The fine print in President Trump's recently signed"big, beautiful bill" could restrict savings for some tipped workers. Why it matters: Trump made "no taxes on tips" a centerpiece of his presidential campaign — and while a provision in the new law honors that idea on the surface, it doesn't eliminate all taxes. Here's what to know: How does the "big, beautiful bill" impact tipped workers? State of play: A qualifying worker's first $25,000 in tips are exempt from income taxes. Tipped workers will still pay 7.65% in payroll taxes that fund Social Security and Medicare. The law shouts out food service and cosmetics industry workers specifically, stressing that the tax exemption will apply "only to certain lines of business." By the numbers: The tax deduction would decrease once a worker's income hits $150,000 — decreasing further at $300,000. Tipped workers filing a joint return with spouses would also see less of a deduction. The law also requires workers to provide their Social Security numbers — as well as any spouses — making undocumented workers ineligible for the tax break. Undocumented immigrants paid $96.7 billion in federal, state, and local taxes in 2022, per the Institute on Taxation and Economic Policy (ITEP). When does the tax provision go into effect? The law will apply to the current tax year, including tips already accrued. How many tipped workers are there? About four million people in the U.S. earned tips in 2023, according to Yale University's Budget Lab. That's 2.5% of all workers. Two-thirds of restaurant workers who work for tips earn so little that they don't pay federal income taxes, per a 2024 report parsing data from the Census Bureau's American Community Survey. Workers are currently taxed on tips, which puts an added financial strain on a demographic that tends to be lower income. The median weekly wage for tipped occupations in 2023 was $538, versus $1,000 for non-tipped workers, per the Budget Lab. What did Trump promise tipped workers on the campaign trail? "No tax on tips" began as a promise Trump made during a 2024 campaign stop in Nevada. It has since become a top talking point for Republicans as they've promoted their megabill. The intrigue: "No tax on tips" has emerged as a rare bipartisan, populist policy. Former Vice President Kamala Harris adopted the promise as a part of her own presidential campaign two months after Trump did. In May, the Senate passed a separate "No Tax on Tips Act" in a surprise move, which no lawmakers — Republican or Democrat — objected to. Will no taxes on tips help tipped workers?
Business Journals
03-07-2025
- Business
- Business Journals
No taxes, no problem?
Preview this article 1 min Georgia and national restaurant industry lobbying groups support the No Tax on Tips Act, but some Atlanta culinary pros have reservations.
Yahoo
11-06-2025
- Business
- Yahoo
For Trump's ‘no tax on tips,' the devil is in the details
(Photo: Las Vegas News Bureau) President Donald Trump's promise to eliminate taxes on tips may sound like a windfall for service workers — but the fine print in Congress' latest tax bill tells a more complex story. Right now, Republican lawmakers are advancing the 'One Big Beautiful Bill Act' — a sprawling, 1,100-page proposal that aims to change everything from tax incentives for electric vehicles to health care. It also includes a proposal to end taxes on tips, which could potentially affect around 4 million American workers. The Senate has recently passed its own version – the No Tax on Tips Act. The idea started getting attention when Trump raised it during a 2024 campaign stop in Las Vegas, a place where tipping is woven into the economy. And the headlines and press releases sound great — especially if you're a waiter, bartender or anyone else who depends on tips for a living. That may be why both Democrats and Republicans alike broadly support the concept. However, like most of life, the devil is in the details. I'm a business-school economist who has written about tipping, and I've looked closely at the language of the proposed laws. So, what exactly has Trump promised, and how does it measure up to what's in the bills? Let's start with his pledge. Back in January 2025, Trump said, 'If you're a restaurant worker, a server, a valet, a bellhop, a bartender, one of my caddies … your tips will be 100% yours.' That sounds like a boost in tipped workers' income. But when you look at the current situation, it becomes clear that the reality is far more complicated. First, the new tax break only applies to tips the government knows about — and a lot of that income currently flies under the radar. Tipped workers who get cash tips are supposed to report it to the IRS via form 4137 if their employer doesn't report it for them. If a worker gets a cash tip today and doesn't report it, they already get 100% of the money. No one really knows what percentage of tips are unreported, but an old IRS estimate pegs it at about 40%. What's more, the current tax code defines tips only as payments where the customer determines the tip amount. If a restaurant charges a fixed 18% service charge, or there's an extra fee for room service, those aren't tips in the government's eyes. This means some tipped workers who think service charges are tips will overestimate the new rule's impact on their finances. The 'Big Beautiful Bill' would create a new tax code section under 'itemized deductions' This area of the tax code already includes text that creates health savings accounts and gives students deductions for interest on their college loans. What's in the new section? First, the bill specifies that this tax break applies just to 'any cash tip.' The IRS classifies payments by credit card, debit card and even checks as 'cash tips.' Unfortunately for workers in Las Vegas, noncash tips, like casino chips, aren't part of the bill. While the House bill limits the deduction to people earning less than US$160,000 the Senate bill caps the deduction to the first $25,000 of tips earned. Everything over that is taxed. Second, the current House bill ends this special tax-free deal on Dec. 31, 2028. That means these special benefits would only last three years, unless Congress extends the law. The Senate bill does not include such a deadline. Third, the exemption is only available to jobs that typically receive tips. The Treasury secretary is required to define the list of tipped occupations. If an occupation isn't on the list, the law doesn't apply. I wonder how many occupations won't make the list. For example, some camp counselors get tips at the end of the summer. But it's unclear the Treasury Department will include these workers as a covered group, since counselors only make up a proportion of summer camp staff. Not making the list is a real problem. And while the new proposal gives workers an income tax break, there's nothing in either bill about skipping FICA payments on the tipped earnings. Workers are still required to contribute slightly more than 7% in Social Security and Medicare taxes on all tips they report, which won't benefit them until retirement. This isn't an oversight — the bill specifically says employees must furnish a valid Social Security number to get the tax benefits. There are a few other ways the legislation might benefit workers less than it seems at first glance. Instituting no taxes on tips could mean tipped employees feel more pressure to split their tips with other employees, like busboys, chefs and hosts. After all, these untipped workers also contribute to the customer experience, and often at low wages. And finally, many Americans are tired of tipping. Knowing that servers don't have to pay taxes might make some to cut back on it even more. The specifics of any piece of legislation are subject to change until the moment Congress sends it to the president to be signed. However, as now written, I think the bills aren't as generous to tipped workers as Trump made it sound on the campaign trail. This article is republished from The Conversation under a Creative Commons license. Read the original article.
Yahoo
10-06-2025
- Business
- Yahoo
For Trump's ‘no taxes on tips,' the devil is in the details
President Donald Trump's promise to eliminate taxes on tips may sound like a windfall for service workers — but the fine print in Congress' latest tax bill tells a more complex story. Right now, Republican lawmakers are advancing the 'One Big Beautiful Bill Act' — a sprawling, 1,100-page proposal that aims to change everything from tax incentives for electric vehicles to health care. It also includes a proposal to end taxes on tips, which could potentially affect around 4 million American workers. The Senate has recently passed its own version – the No Tax on Tips Act. The idea started getting attention when Trump raised it during a 2024 campaign stop in Las Vegas, a place where tipping is woven into the economy. And the headlines and press releases sound great — especially if you're a waiter, bartender or anyone else who depends on tips for a living. That may be why both Democrats and Republicans alike broadly support the concept. However, like most of life, the devil is in the details. I'm a business-school economist who has written about tipping, and I've looked closely at the language of the proposed laws. So, what exactly has Trump promised, and how does it measure up to what's in the bills? Let's start with his pledge. Back in January 2025, Trump said, 'If you're a restaurant worker, a server, a valet, a bellhop, a bartender, one of my caddies … your tips will be 100% yours.' That sounds like a boost in tipped workers' income. But when you look at the current situation, it becomes clear that the reality is far more complicated. First, the new tax break only applies to tips the government knows about — and a lot of that income currently flies under the radar. Tipped workers who get cash tips are supposed to report it to the IRS via form 4137 if their employer doesn't report it for them. If a worker gets a cash tip today and doesn't report it, they already get 100% of the money. No one really knows what percentage of tips are unreported, but an old IRS estimate pegs it at about 40%. What's more, the current tax code defines tips only as payments where the customer determines the tip amount. If a restaurant charges a fixed 18% service charge, or there's an extra fee for room service, those aren't tips in the government's eyes. This means some tipped workers who think service charges are tips will overestimate the new rule's impact on their finances. The 'Big Beautiful Bill' would create a new tax code section under 'itemized deductions' This area of the tax code already includes text that creates health savings accounts and gives students deductions for interest on their college loans. What's in the new section? First, the bill specifies that this tax break applies just to 'any cash tip.' The IRS classifies payments by credit card, debit card and even checks as 'cash tips.' Unfortunately for workers in Las Vegas, noncash tips, like casino chips, aren't part of the bill. While the House bill limits the deduction to people earning less than US$160,000 the Senate bill caps the deduction to the first $25,000 of tips earned. Everything over that is taxed. Second, the current House bill ends this special tax-free deal on Dec. 31, 2028. That means these special benefits would only last three years, unless Congress extends the law. The Senate bill does not include such a deadline. Third, the exemption is only available to jobs that typically receive tips. The Treasury secretary is required to define the list of tipped occupations. If an occupation isn't on the list, the law doesn't apply. I wonder how many occupations won't make the list. For example, some camp counselors get tips at the end of the summer. But it's unclear the Treasury Department will include these workers as a covered group, since counselors only make up a proportion of summer camp staff. Not making the list is a real problem. And while the new proposal gives workers an income tax break, there's nothing in either bill about skipping FICA payments on the tipped earnings. Workers are still required to contribute slightly more than 7% in Social Security and Medicare taxes on all tips they report, which won't benefit them until retirement. This isn't an oversight — the bill specifically says employees must furnish a valid Social Security number to get the tax benefits. There are a few other ways the legislation might benefit workers less than it seems at first glance. Instituting no taxes on tips could mean tipped employees feel more pressure to split their tips with other employees, like busboys, chefs and hosts. After all, these untipped workers also contribute to the customer experience, and often at low wages. And finally, many Americans are tired of tipping. Knowing that servers don't have to pay taxes might make some to cut back on it even more. The specifics of any piece of legislation are subject to change until the moment Congress sends it to the president to be signed. However, as now written, I think the bills aren't as generous to tipped workers as Trump made it sound on the campaign trail. Jay L. Zagorsky does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
