by Lacey Pfalz
Last updated: 10:10 AM ET, Wed May 21, 2025
The ‘No Tax on Tips’ bill, originally introduced in January establishing a tax deduction for most workers of up to $25,000 for tips, passed unanimously in the Senate on May 20.
The bill states that cash tips received by an employee in an occupation that typically receives tips, such as in hospitality or restaurant work, and tips reported by the employee to their employer for purposes of withholding payroll taxes will eligible for the tax deduction, provided the employee makes under $160,000 this year (a number that will be adjusted annually for inflation).
Under current law, employees receiving tips over $20 per month are required to report them to their employer.
The bill also expands a business tax credit for payroll taxes the employer pays on tips in connection with beauty, body and spa treatments.
According to Forbes, Sen. Jacky Rosen, D-Nev., presented the bill today on a “unanimous consent” request and faced no objection, meaning the measure passed without a vote. The bill now heads to the House of Representatives.
Estimates suggest that the bill would save average tipped workers in the bottom 60 percent of income distribution $1,260 in taxes—including many who work in the hotel industry and rely on tips to supplement their income.
Both Republicans and Democrats put their support behind the bill, as tips often comprise 23 percent of restaurant workers’ total income. Both President Trump and Vice President Kamala Harris ran their presidential campaigns in support of the bill last year.
The American Hotel & Lodging Association celebrated this important step in passing the bill, with Rosanna Maietta, President & CEO of AHLA commenting, “AHLA applauds the U.S. Senate for unanimously passing the ‘No Tax on Tips Act.’ This bipartisan legislation will put more money in the pockets of the hundreds of thousands of hotel workers who receive tips, ranging from housekeepers and valets to food service professionals and bellhops.”
“We thank Senators Ted Cruz and Jacky Rosen as well as their co-sponsors for their leadership on this important measure.”
However, some detractors say the bill could discourage employers from providing basic wage increases over time.
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