Tips Could Soon Be Tax-Free Thanks to New Senate Bill
In a rare bipartisan move, the U.S. Senate unanimously approved the No Tax on Tips Act. This bill seeks to eliminate federal taxes on tip income, aiming to provide direct financial relief to service industry workers.
The legislation specifically targets employees in hospitality, food service, and delivery jobs. For many in these roles, tips constitute a major portion of their overall earnings, which are currently subject to full taxation.
Introduced by Senator Ted Cruz (R-Texas) and co-sponsored by Senator Jacky Rosen (D-Nevada), the bill emphasizes fairness. It is designed to support workers who often work long hours yet live paycheck to paycheck.
“These workers deserve to keep more of what they earn,” stated Cruz. Rosen highlighted the bill’s importance for states with large tourism sectors, saying it offers workers “the respect and support they deserve.”
If enacted, the law would allow employees to report tips for recordkeeping without them being taxed. This exemption would apply only to tips, not to regular wages, salaries, or employer-paid bonuses.
Supporters argue the measure would simplify reporting for businesses and increase take-home pay for workers. While some tax experts have questioned enforcement and Social Security implications, lawmakers believe these are manageable.
The bill now advances to the House of Representatives for consideration. Advocates are optimistic about its passage, seeing it as historic recognition of service workers’ vital role in the economy.
