Senate Unanimously Passes 'No Tax on Tips Act,' Offering Relief to Service Industry Workers

 

Senate Unanimously Passes 'No Tax on Tips Act,' Offering Relief to Service Industry Workers

In a surprising and unanimous decision, the U.S. Senate passed the "No Tax on Tips Act" on May 20, 2025, marking a significant step toward eliminating federal income taxes on tips for service industry workers. The bipartisan bill, co-sponsored by Senators Ted Cruz (R-Texas), Jacky Rosen (D-Nev.), and Catherine Cortez Masto (D-Nev.), aims to provide financial relief to millions of Americans in traditionally tipped occupations.

Key Provisions of the Bill

For qualified tips received throughout the taxable year, the "No Tax on Tips Act" offers a tax deduction of up to $25,000. The tips must be disclosed to employers by current IRS regulations to be eligible. The bill explicitly targets professions, including waitstaff, bartenders, and hairstylists, that were known to earn tips as of December 31, 2023. The deduction specifically targets lower- and middle-income workers by excluding those whose pay surpassed specific criteria in the previous year.

Bipartisan Support and Legislative Journey

Bipartisan support was evident in the Senate's unanimous approval of the plan.  Senator Cruz said, "This pro-worker bill will help families who are having trouble paying their bills." This illustrated how the plan addressed working-class Americans' concerns.  Senators Rosen and Cortez Masto were concerned about the bill's possible effects on Nevada's economy, which is heavily dependent on tips and is centered on the hospitality industry.

Now that the bill is in the House of Representatives, Speaker Mike Johnson (R-La.) has declared that he will give it top priority along with other tax reform initiatives. As evidence of how quickly the legislative process is moving along, the House may hold a vote as early as this week.

Next Steps and Outlook

The bill appears to have a decent chance of passing the House because of the Senate's bipartisan backing. The law has broad support from both parties and, if it succeeds, would fulfill a campaign promise made by former President Trump. The move demonstrates that policymakers are growing increasingly conscious of the financial challenges that employees in the service sector confront in the current economic climate.
The "No Tax on Tips Act," a major policy reform, may affect millions of Americans. The House's deliberations will be closely watched by stakeholders from the service industry and beyond to follow the progress of this legislation.