S. 129 · Where this bill is now
In the House
Passed the Senate May 20, 2025. Received May 26, 2025; no House vote yet
What this bill does
In plain words · AI-written from the official summaryNew tax deduction for tips up to $25,000
This bill would let employees deduct up to $25,000 in tips from their taxable income, but only if those tips were cash tips reported to their employer and they work in an occupation that typically receives tips. It also expands a tax credit that businesses can use when paying payroll taxes on employee tips, now including tips from beauty services like hair care, nails, and spa treatments.
How it affects you
If you work in a job where you receive tips—like restaurants, hair salons, nail places, or spas—you could potentially lower your taxes by deducting your tips. This only applies if you made less than $160,000 in the prior year and reported your cash tips to your employer. Employers in those industries may also see tax credits when they pay payroll taxes connected to employee tips.
Read the official summary (Introduced in Senate, Jan 16, 2025)
No Tax on Tips Act
This bill establishes a new tax deduction of up to $25,000 for tips, subject to limitations. The bill also expands the business tax credit for the portion of payroll taxes an employer pays on certain tips to include payroll taxes paid on tips received in connection with certain beauty services.
Under the bill, the new tax deduction for tips is limited to cash tips (1) received by an employee during the course of employment in an occupation that customarily receives tips, and (2) reported by the employee to the employer for purposes of withholding payroll taxes. (Under current law, an employee is required to report tips exceeding $20 per month to their employer.)
Further, an employee with compensation exceeding a specified threshold ($160,000 in 2025 and adjusted annually for inflation) in the prior tax year may not claim the new tax deduction for tips.
Finally, the bill expands the business tax credit for the portion of payroll taxes that an employer pays on certain tips to include payroll taxes paid on tips received in connection with barbering and hair care, nail care, esthetics, and body and spa treatments. (Under current law, an employer is allowed a business tax credit for the amount of payroll taxes paid on certain tips received by an employee in connection with providing, delivering, or serving food or beverages.)
Written by AI (Claude) using only the official summary by the Congressional Research Service, the Library of Congress’s nonpartisan research staff. It can miss nuance, so check the official summary and the bill text for details.
1st SessionS. 129
AN ACT
No Tax on Tips Act
Sponsor: Sen. Ted Cruz (R-TX) · Introduced Jan 16, 2025 · Taxation · 2 versions of the text
Sources: Congress.gov actions and votes · bill text from GovInfo · latest official action May 26, 2025: “Held at the desk.”
Sections
The wording of this bill hasn’t changed across its 2 official versions.