Trump's "big, beautiful bill" stops short of "no tax on tips" promise
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"No tax on tips" began as a promise Trump made during a 2024 campaign stop in Nevada. Photo by MANDEL NGAN/AFP via Getty Images
The fine print in President Trump's recently signed "big, beautiful bill" could restrict savings for some tipped workers.
Why it matters: Trump made "no taxes on tips" a centerpiece of his presidential campaign — and while a provision in the new law honors that idea on the surface, it doesn't eliminate all taxes.
Here's what to know:
How does the "big, beautiful bill" impact tipped workers?
State of play: A qualifying worker's first $25,000 in tips are exempt from income taxes.
- Tipped workers will still pay 7.65% in payroll taxes that fund Social Security and Medicare.
- The law shouts out food service and cosmetics industry workers specifically, stressing that the tax exemption will apply "only to certain lines of business."
By the numbers: The tax deduction would decrease once a worker's income hits $150,000 — decreasing further at $300,000.
- Tipped workers filing a joint return with spouses would also see less of a deduction.
The law also requires workers to provide their Social Security numbers — as well as any spouses — making undocumented workers ineligible for the tax break.
- Undocumented immigrants paid $96.7 billion in federal, state, and local taxes in 2022, per the Institute on Taxation and Economic Policy (ITEP).
When does the tax provision go into effect?
- The law will apply to the current tax year, including tips already accrued.
How many tipped workers are there?
- About four million people in the U.S. earned tips in 2023, according to Yale University's Budget Lab. That's 2.5% of all workers.
- Two-thirds of restaurant workers who work for tips earn so little that they don't pay federal income taxes, per a 2024 report parsing data from the Census Bureau's American Community Survey.
- Workers are currently taxed on tips, which puts an added financial strain on a demographic that tends to be lower income. The median weekly wage for tipped occupations in 2023 was $538, versus $1,000 for non-tipped workers, per the Budget Lab.
What did Trump promise tipped workers on the campaign trail?
- "No tax on tips" began as a promise Trump made during a 2024 campaign stop in Nevada.
- It has since become a top talking point for Republicans as they've promoted their megabill.
The intrigue: "No tax on tips" has emerged as a rare bipartisan, populist policy.
- Former Vice President Kamala Harris adopted the promise as a part of her own presidential campaign two months after Trump did.
- In May, the Senate passed a separate "No Tax on Tips Act" in a surprise move, which no lawmakers — Republican or Democrat — objected to.
Will no taxes on tips help tipped workers?
- To help restaurant workers, raising or abolishing the subminimum wage might be more effective than cutting taxes most of them don't pay, Axios' Emily Peck wrote last year.
- Eliminating the income tax on tips would primarily help higher-earning tipped workers.
