June 12, 2025

No Tax on Tips Act Passes Senate Unanimously

News Summary

In a significant victory for service workers in Texas, the No Tax on Tips Act has passed the Senate with a unanimous vote. This bill will exempt cash tips from federal income tax, allowing workers to claim a full deduction on their tipped wages. The legislation, backed by bipartisan support, aims to provide financial relief to those in the service industry, potentially increasing their take-home pay. As the bill moves to the House of Representatives, advocates emphasize its importance in easing the economic burden on low and middle-income workers.

Texas – The Senate has passed the No Tax on Tips Act with an unanimous vote of 100-0, marking a significant step toward exempting cash tips from federal income tax. The bill, introduced by Senator Ted Cruz (R-Texas) and co-led by Senator Jacky Rosen (D-Nevada), will now move to the U.S. House of Representatives for a vote.

The proposed legislation aims to exempt all forms of cash tips—including those received via cash, credit and debit cards, and checks—from federal income taxation. Taxpayers will be eligible to claim a 100% deduction for tipped wages when filing their taxes. This measure is anticipated to provide substantial financial relief to workers in the service sector, such as waitstaff, bartenders, and delivery drivers who rely primarily on tips for their income.

If passed, the No Tax on Tips Act will allow deductions on tips up to $25,000 for workers earning $160,000 or less during the tax year 2025. Notably, the proposed deduction is set to expire in four years unless it is made a permanent fixture of the tax code.

A notable detail about the bill’s journey through the Senate is that its passage came as a surprise, as many expected at least one senator might object, which did not occur. This bipartisan support reflects a collective recognition of the potential impact on the service industry.

The No Tax on Tips Act is rooted in a campaign promise made by President Donald Trump. It is part of a broader initiative known as the “One Big Beautiful Bill Act,” which seeks to fulfill various campaign pledges that include tax relief measures and border security enhancement. The emphasis of this particular legislation lies in its potential to assist lower and middle-income workers, aligning with recent urges towards tax reform beneficial to these demographics.

While advocates support the bill as a commonsense approach to taxing tips, there are critics who caution that the measure might not substantially aid hourly workers who usually do not pay federal income taxes. Regardless, the White House Council of Economic Advisers has estimated that the implementation of this act could increase the average take-home pay for tipped workers by around $1,675 per year—a figure that could significantly affect the livelihoods of those in the service industry.

Feedback from service workers, such as hair stylist Peyton Wood from Central Texas, indicates enthusiasm for potential financial benefits, given that tips contribute a major portion of their earnings. Currently, the tax exemption only applies to cash tips reported to employers for tax withholding. With the new legislation, it is expected that many more service workers will feel immediate financial relief.

The House of Representatives has not yet scheduled a vote on the No Tax on Tips Act. Should the legislation receive approval there, it will ultimately be forwarded to the President for final signing into law.

This legislation arrives at a time when many in the service industry are grappling with financial hurdles due to economic fluctuations and the impacts of the COVID-19 pandemic. As policymakers continue to address the economic challenges faced by service workers, the No Tax on Tips Act serves as a significant step towards creating a tax system that reflects the realities of employment in sectors heavily reliant on tipping.

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Author: STAFF HERE GEORGETOWN

GEORGETOWN STAFF WRITER The GEORGETOWN STAFF WRITER represents the experienced team at HEREgeorgetown.com, your go-to source for actionable local news and information in Georgetown, Williamson County, and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as the Red Poppy Festival, Georgetown Swirl, and Christmas Stroll. Our coverage extends to key organizations like the Georgetown Chamber of Commerce and the Downtown Georgetown Association, plus leading businesses in manufacturing and tourism that power the local economy such as local wineries and historic downtown shops. As part of the broader HERE network, including HEREaustin.com, HEREcollegestation.com, HEREdallas.com, HEREhouston.com, HEREgeorgetown.com, and HEREsanantonio.com, we provide comprehensive, credible insights into Texas's dynamic landscape.