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No Tax on Tips Act
5/27/2025, 8:05 AM
Summary of Bill S 129
The main goal of this legislation is to provide relief to individuals who rely on tips as a significant portion of their income, such as restaurant servers, bartenders, and other service industry workers. By allowing these individuals to deduct their tips from their taxable income, the bill seeks to ensure that they are not unfairly taxed on income that is often unpredictable and can vary greatly from month to month.
In addition to eliminating the income tax on tips, the bill also includes provisions for other purposes, although specific details on these provisions are not provided in the summary. Overall, the Tip Income Protection Act aims to provide much-needed financial relief to individuals who rely on tips as a significant source of income, and to ensure that they are not burdened with unnecessary taxes on this income.
Congressional Summary of S 129
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.)
Read the Full Bill
Current Status of Bill S 129
Bipartisan Support of Bill S 129
Total Number of Sponsors
6Democrat Sponsors
0Republican Sponsors
6Unaffiliated Sponsors
0Total Number of Cosponsors
15Democrat Cosponsors
4Republican Cosponsors
11Unaffiliated Cosponsors
0Policy Area and Potential Impact of Bill S 129
Primary Policy Focus
TaxationAlternate Title(s) of Bill S 129
Comments
Yisroel Starr
10 months ago
I think this bill is good cuz it means I don't gotta pay taxes on my tips anymore. That's more money in my pocket! Love it! #taxes #tips #money
Marshall King
10 months ago
As a Democrat from MH, I am deeply saddened by the implications of this bill. Eliminating income tax on tips may seem like a good idea on the surface, but it could have negative consequences for our country. It could lead to a decrease in government revenue, which could result in cuts to important social programs that many Americans rely on. Additionally, it may disproportionately benefit those who receive tips, while leaving out other low-income workers who do not receive tips as part of their income. How will this bill truly benefit the American people in the long run?
