The U.S. Senate has passed the No Tax on Tips Act, a bipartisan bill that would exempt tip income from federal taxes. Here’s what it means for restaurant staff, delivery drivers, and service workers across America.
Tips Could Soon Be Tax-Free Thanks to New Senate Bill
In a rare show of bipartisan agreement, the U.S. Senate has unanimously passed the No Tax on Tips Act, a new bill that could give millions of service workers a major financial boost.
The bill, introduced by Senator Ted Cruz (Texas) and co-sponsored by Senator Jacky Rosen (Nevada), would exempt tips from federal taxation. That means workers in restaurants, hotels, delivery services, and other tip-based jobs could soon keep more of the money they earn.
“These workers deserve to keep more of what they earn,” Cruz said. Rosen added that the measure is especially important for states with tourism-driven economies like Nevada, calling it a way to give service workers “the respect and support they deserve.”
Currently, tipped employees are required to report tips as taxable income, and businesses must withhold federal taxes. If this bill becomes law, tips would still be reported for recordkeeping but would no longer be taxed at the federal level. Salaries, wages, and bonuses, however, would still be taxed as usual.
Supporters argue the change would simplify tax reporting, reduce burdens on employers, and allow workers to take home more pay. Many restaurant and hospitality employees could save thousands of dollars each year.
Some tax experts have raised questions about how the law would affect Social Security contributions and tax enforcement, but lawmakers remain confident that these issues can be managed.
The bill now heads to the House of Representatives for debate. If passed, the No Tax on Tips Act would mark a historic win for the millions of Americans who rely on tips as a key part of their income.