Senate unanimously approves bill to create tax deduction for cash tips

[Jose Garcia]

Source: USA Today

WASHINGTON – The U.S. Senate on May 20 unexpectedly passed a bill to create a new tax deduction on tips worth up to $25,000.

The bill, introduced by Sen. Ted Cruz, R-Texas, was brought up for a voice vote by Sen. Jacky Rosen, D-Nevada. It passed with unanimous consent – a rare occurrence for substantive legislation.

The deduction would only apply to cash tips and could be claimed by people who earn up to $160,000, which would rise along with inflation.

Ending taxes on tips would cost around $110 billion in federal revenues over the next 10 years, according to estimates by the center-right Peter G. Peterson Foundation.

Read more: https://www.usatoday.com/story/news/politics/2025/05/20/senate-no-tax-tips/83753853007/

[lapfog_1]

1. yup... all the waiters and waitresses I know

will definitely itemize their deductions to be able to file for this tax deduction.

Trump got their vote because he promised to NOT TAX the tips... this is different.

[Ms. Toad]

36. It isn't clear from anything I can find quickly that this is an itemized deduction or a front page deduction

(like IRA and certain charitable contributions)

[sir pball]

41. Tangential but they prefer to be called "servers" these days

Am chef, know about this—"waiter" and "waitress" are outdated to the point that I haven't heard those words in at least twenty years.

Except from the seniors who come to our museum cafe on Tuesday tour groups, and direct it at me as I'm literally dressed in chef whites…

[no_hypocrisy]

2. Less Social Security and Medicare for servers then.

[wishstar]

7. Tips won't be exempt from payroll taxes, just federal income taxes

Reports I have read say that in order for tips to be exempt they have to have been reported for payment of appropriate payroll taxes, then the worker can write off the gross amount of tips as a deduction from countable income when they file their tax return.

[JBTaurus83]

3. Why?

I work in Philly which is a pretty expensive city. I am a civil servant making about 50k per year and taxed heavily. Why should you get a tax cut just because of the line of work you are in? I guess I picked the wrong profession.

[Falcon101]

10. Yep

Their wages are in tips while others get a check while others get 1099 income and others get SSA so why should those who get tips get special favor. Seems like it will create resentment.

[bamagal62]

31. Because tips are not only

Bar tenders. Think “tips” for Supreme Court justices. My guess is, tips fall under many things. It’s a scam.

[markodochartaigh]

18. The real secret is that the supreme court

just said that state and local officials can accept tips but not bribes. So now those officials will get tips on the order of tens of thousands of dollars, or more, and won't have to pay income tax on those "tips".

[ClaudetteCC]

46. The server making a few hundred a night in tips at a nicer place is tax exempt

but the dishwasher getting minimum wage is not. Though at min wage there likely isn't much of a federal income tax burden.

[thatdemguy]

4. opps I read it wrong

[LiberalArkie]

5. I wonder how many times a month this can be claimed. As a lot of very wealthy people do not have

an payroll income. Comes to mind Steve Jobs and Elon Musk.

$160,000 seems like a pretty good income to be getting cash tips.

[Wiz Imp]

14. Huh? There's nothing to be claimed monthly

This would be a deduction applied to their annual income tax return.

[Jack Valentino]

22. Not if you live in New York or California, I suppose...

yeah, it should be enough to live on in those places---
but I could go much further in Michigan on such an income...

[angrychair]

6. What the hell is happening

We cannot get Senate Democrats to stop voting for Republicans and their bills. Anything proposed by Ted fucking Cruz is toxic, I don't give a shit what it says.
PLEASE STOP VOTING FOR WITH GOD DAMN REPUBLICANS. It's not that complicated of a request.

[kelly1mm]

25. Ummmm, this was a proposal endorsed by our 2024 Presidential candidate....... just saying. nt

[angrychair]

35. Irrelevant

Ted "Cancun Bob" Cruz was the lead sponsor. There is zero evidence to suggest that Republicans, especially that one, do anything that doesn't benefit themselves or other rich assholes just like them.
There isn't an altruistic bone in his body.
I may not know right now but their is a poison pill in there somewhere. If you think I'm wrong then you haven't been listening to this psychopath talk...ever.
Democrats should NEVER help advance the Republican agenda. NEVER. EVER. NEVER.

[MichMan]

44. Candidates running for the 2028 nomination can always campaign on a promise to restore taxes on tips, I suppose.

[angrychair]

47. It's not about the taxes on tips itself

As is the case with most laws passed by Congress, the devil is in the details. There are weird provisions like non-cash tips like individual checks and money orders, have to be for $10,000 or less. What waiter ever got a $10,000 tip at all? Much less as a money order? That sent up a red flag for me. Other weird use of language that seems to create potential loopholes as to what is defined as a "tip" and whom is eligible.

[jmowreader]

8. Only applies to cash tips?

Most people these days tip by adding the tip to their credit or debit card bill.

And seriously guys, if this is going to be a Schedule A deduction then it's basically a nothingburger. A single parent gets a $20,900 standard deduction and a single person without dependents gets a $14,600 standard deduction. How many people work in the kind of restaurants where the patrons tip that heavily?

Let's throw some numbers in here. We will assume that our tipped employee has a child (so, head of household status) and works five days a week, 50 weeks per year, or 250 work days. If you divide $20,900 by 250 days the employee has to average $83.60 in tips every day to break even by itemizing if she has no other deductible expenses. The employee ALSO has to earn more than $20,900 in both wages and tips to push her income into taxable territory...so if she's making only $20,000 per year she wasn't paying taxes in the first place.

[LonePirate]

9. I am really torn on this.

I generally support the concept of excluding tips from taxable income as millions of taxpayers in the lower and middle classes in this country rely on tips to make ends meet. I absolutely despise that Trump crafted this policy or is at least given credit for coming up with this policy. He and Repubs will receive all the credit with none going to Dems if this becomes law. At best, Dems might be able to avoid going on record as opposing the concept.

That being said, this bill seems to be something different by including the policy within the itemized deductions process which few tip earners currently use and likely won't use in the future unless a hefty portion of their income is from tips. I do not like Rosen allowing this pass via unanimous consent and no objection in the Senate, almost certainly because of the many service and tip-oriented workers in her state. I understand why she allowed this to happen as it may be the least politically painful of the choices here.

[Silent Type]

11. Cruz's bill does not require itemization, it includes cash AND credits card tips. Gonna be hard to oppose that.

“The Senate bill, introduced by Sen. Ted Cruz (R-TX) and titled the “No Tax on Tips Act,” would create a 100 percent above-the-line deduction for cash tip income, with cash in this context referring to payments in physical currency, debit or credit card payment, or checks. Non-cash tips (like a ticket, a coupon, or some other item of value) would presumably remain taxable. Additionally, both cash and non-cash tips would remain taxable under the payroll tax. Rep. Byron Donalds (R-FL) has introduced a companion bill in the House. However, a different House bill, introduced by Rep. Thomas Massie (R-KY) and Matt Gaetz (R-FL) and titled the “Tax-Free Tips Act of 2024,” would exempt tips from both income and payroll taxes.”

https://taxfoundation.org/blog/tipping-trump-tax-on-tips/#:~:text=The%20Senate%20bill%2C%20introduced%20by,credit%20card%20payment%2C%20or%20checks.

[creeksneakers2]

19. I'm very skeptical

Other reports just say cash tips and here's what the bill says: —There shall be allowed as a deduction an amount equal to the qualified tips received during the taxable year that are included on statements furnished to the employer pursuant to section 6053(a).

The employee usually doesn't report their charge tips because they go through the employer to begin with so the employer already knows what they are. Check go to straight to the house too. Those reports are just for cash. Elsewhere the bill just says cash.

&quot a)Reports by employees
Every employee who, in the course of his employment by an employer, receives in any calendar month tips which are wages (as defined in section 3121(a) or section 3401(a)) or which are compensation (as defined in section 3231(e)) shall report all such tips in one or more written statements furnished to his employer on or before the 10th day following such month. Such statements shall be furnished by the employee under such regulations, at such other times before such 10th day, and in such form and manner, as may be prescribed by the Secretary."

Cash tips are only a small fraction of tip income. The bill also says the cabal still has to come out with a list of what professions qualify. Will they include cab drivers? How knows?

https://www.congress.gov/119/bills/s129/BILLS-119s129is.pdf

[Silent Type]

20. You could read the bill. I'm as certain as I can be it would include credit card tips the employee gets.

[Jack Valentino]

24. I believe what you say. "Cash tips" is another instance of very poor reporting by the MSM,

it would appear.

[Silent Type]

26. Have to admit, I wondered too when I first saw "cash." But since checks are considered "cash," I looked it up.

[creeksneakers2]

27. The bill makes says only tips reported to employers.

Employees only report case tips. The employer already knows what the credit card and check tips are.

https://www.congress.gov/119/bills/s129/BILLS-119s129is.pdf

‘SEC. 224. QUALIFIED TIPS.
7 ‘‘(a) IN GENERAL.—There shall be allowed as a deduction an amount equal to the qualified tips received during the taxable year that are included on statements furnished to the employer pursuant to section 6053(a).

Then later at 16 it says, "‘‘(1) IN GENERAL.—The term ‘qualified tip’ means any cash tip received by an individual..." Doesn't mention credit card tips there either.

How do you know its poor reporting?

[creeksneakers2]

30. I already linked to the bill.

See my response #27. https://www.congress.gov/119/bills/s129/BILLS-119s129is.pdf

Here's what it says: "‘‘(a) IN GENERAL.—There shall be allowed as a deduction an amount equal to the qualified tips received during the taxable year that are included on statements furnished to the employer pursuant to section 6053(a).

I've worked in tipped professions an normally you only report cash. The employer already know what the tips are from charges and checks.

Elsewhere the bill says: "‘‘(1) IN GENERAL.—The term ‘qualified tip’
17 means any cash tip received by an individual...."

Here is how the IRS defines cash: "Now, what about “cash”? As explained in the IRS Form 8300 Reference Guide, “[c]ash includes the coins and currency of the United States and a foreign country. Cash may also include cashier’s checks, bank drafts, traveler’s checks, and money orders with a face value of $10,000 or less, if the business receives the instrument in . . . [a] designated reporting transaction . . . or [a]ny transaction in which the business knows the customer is trying to avoid reporting of the transaction on Form 8300.” Doesn't say anything about credit card payments.

What makes you so certain?

[Jack Valentino]

23. No help for the poor low-income hourly bastards who don't get any tips, though...

It is at least a tax reduction on *some* lower wage workers....

Rather 'strategic', IMHO, as a poor balance to the tax cuts proposed
for the very high income bracket.... to lesson the opposition to the bill by lower-wage workers

[Silent Type]

29. Oh, I agree. trump has commented on removing income taxes for all lower incomes. Sure he lied.

But fact is, those in the 50th Percentile pay less than 3% of total federal income taxes. That’s not a lot and it would not be hard to eliminate income taxes on that group to further lessen opposition.

If you remember, after trump proposed removing taxes on tips during campaigns, VP Harris said the same.

I’m sure, not taxing Social Security would be a winner too, though not costing a lot, at least on paper. Think trump has thrown that around. Would help me, but not if it helps him.

[Javaman]

12. I'm just waiting now for the owners of said restaurants and bars to start skimming or outright taking tips

And call them their own.

[chowder66]

13. People will probably tip less because of this.

[BlueTsunami2018]

16. Why?

This isn’t going to change my tipping habits. It never even entered my mind.

Why do you think it would cause people to tip less?

[chowder66]

17. Rich people will see it as an excuse to tip less as well as mean assholes.

[Silent Type]

33. Saw your post earlier and have been thinking about it, I think you are right. A-holes like trump will say

trump saved you $2 in taxes a day, so I’ll leave you $3 less in a tip. Then the next 10 A-holes do the same.

[Falcon101]

38. Yes they will

It does create a sense of resentment. If I make $12 a hour taxable by receiving regular income, I will naturally reduce my tip to you knowing its tax free. Frankly, I will do the same. Rosen acts like casino waitresses are so lowly paid. I can see the tips they get just to hand you a bottle of water. Why should that be free money but the guy who stacks the bottles at the bar have to pay taxes?

[Blues Heron]

15. Didnt SCOTUS rule that bribes are tips? Cha CHing!

[Silent Type]

21. True, I laughed hard. Although government level bribes are usually more than $160K

[dweller]

28. So let me ask this

If I’m on the corner and busking with my guitar and I get $$ in my case …
From passing people …
Thats a tip right ?


✌🏻

[Silent Type]

32. LOL. I'd darn sure list it under tips. But, honestly, would you report all of it now?

[Mawspam2]

34. No tax on "tips", but then we'll claw it all back in tariffs.

Oh, and we'll also take your ACA, SNAP, Heating assistance, Medicade, Head Start, and more.

[DFW]

37. What the Fed may lose in revenue will be partially recovered by the States

What serving staff get in tips will often be spent right back into the economy, generating income to the businesses that receive the extra turnover as well as the sales taxes collected by the states. It's nowhere near a 100% loss to the nation, probably not even a 25% loss when all told.

[twodogsbarking]

39. Fucking up taxes for more than fifty years and they never tire of it.

[sir pball]

40. As a thirty-year hospitality worker this made me giggle

I'm BOH so it doesn't affect me, but I'm intimately aware of the workings of FOH and this is…a silly bill, to say the least.

Cash tips are de facto exempt from any and all taxes, because cash tips are almost never reported. Straight into your server's pocket, thank you, have a good evening. Any server reporting their cash tips is a fool…not to mention I've never seen an itemized tip-out that differentiates cash and credit tips.

[MichMan]

42. The bill doesn't differentiate between cash and credit tips either.

Sorry to hear that you believe those paying taxes they owe is a fool. Is a small business that follows the law a fool, compared to one that pays its employees in cash, and evades payroll taxes, workman's comp, and unemployment taxes ?

[LaMouffette]

43. Our Dems HAD to vote for it or the Repubs would've screeched: "The tax-and-spend Democrats are taxing your tips!!!" But

one major effect that I see coming is that employers will reduce servers' hourly wages since, they reason, their tips will bring them up to minimum wage. Here in Montana, employers must only pay tipped employees $2.13 an hour! They will probably reduce that to $1.00 now that servers' tips will not be taxed.

If they had required employers to pay the minimum wage AND eliminated taxes on tips, that would've been almost human of them. If they had done both of these AND raised the minimum wage to $15.00 an hour, THEN I would have been impressed.

I've been a server. Waiting on customers who are complete assholes or screaming,, food-hurling babies, or grab-your-ass letches is horrible. Servers deserve fair wages and tons of respect.

[Nimble_Idea]

45. dont matter- they can use that cash to buy bananas and bacon. drill baby drill.

and pay down those tesler and student debt

[Simeon Salus]

48. This is entirely about newly legal cash tips for elected officials

Not for servers.

You know ANY dancers, servers or bartenders making that kind of cash?

[BlueTsunami2018]

49. You'd be surprised.

Almost everyone I know in the service industries do not want tipping to end at all because they make bank from them and you never report what you really make. They already get tax free tips. They don’t want to be paid a “living wage” and be untipped.

Dancers can make crazy money in strip clubs. I knew one girl who was making $150k a year easy and this was thirty years ago. Those high end “gentleman’s clubs” rake. Hell, even the dive joints make a lot of money.

There’s definitely a lot more money flowing through those bars and restaurants than you might think.

[Simeon Salus]

53. Right. I'm sure there are hundreds of thousands of American servers, bartenders and dancers making $160K per annum!

You're speaking to the rare exception and ignoring my central assertion.

This aspect of the BBB is about greedy politicians, not working folks.

[Wingus Dingus]

50. Well, I'm not going to be super generous anymore with my (post-tax) tip dollars based on my (post-tax)

(inflated/expensive) meal/drink dollars in order to donate even more to their (non-taxed) tip income. Back to 15%. Honestly, I rarely eat in sit-down restaurants anymore anyway. I try to avoid tipping situations.

[bucolic_frolic]

51. Is this now a negotiable component of compensation?

I'd like $25K of my annual compensation in the form of cash.

Who's going to enforce it otherwise?

[JustAnotherGen]

52. It's a trick

[Maeve]

54. But the real question is "will this affect GrovelBot???" That tip jar is vital!