No Tax on Tips Act
2/12/2025, 11:08 AMSummary of Bill HR 482
Bill 119 HR 482, also known as the "Tip Income Protection Act," aims to amend the Internal Revenue Code of 1986 in order to eliminate the application of income tax on qualified tips. This would be achieved through a deduction allowed to all individual taxpayers. The bill seeks to provide protection for tip income by ensuring that individuals who receive tips as part of their income are not unfairly taxed on this portion of their earnings.The main purpose of this legislation is to address the issue of taxation on tip income, which has been a point of contention for many individuals in the service industry. By allowing for a deduction on qualified tips, the bill aims to provide relief for those who rely on tips as a significant portion of their income.
In addition to eliminating the income tax on qualified tips, the bill also includes provisions for other purposes. While the specific details of these provisions are not outlined in the summary, it is clear that the overall goal of the legislation is to provide support and protection for individuals who earn tip income. Overall, Bill 119 HR 482 seeks to address the taxation of tip income by allowing for a deduction on qualified tips for all individual taxpayers. This legislation aims to provide relief and support for individuals in the service industry who rely on tips as a significant source of income.
Congressional Summary of HR 482
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.)
