Legislers in the Senate have approved a bill that would eliminate the federal income tax on tipped income.
Why it matters
Nixing -income tax was one of the best policy promises of President Donald Trump during his 2024 election campaign, and the idea was also embraced by Democrats.
What does the no tax do on tips account?
The No Tax On Tips Act would introduce a new tax deduction of up to $ 25,000 for tips, with certain restrictions.
It was introduced in January by Texas Senator Ted Cruz, together with a dual group of co-sponsors, including Nevada Democratic Senator Jacky Rosen. Republicans allowed Rosen to promote the bill through a unanimous permission agreement – a procedure with which each senator can apply for the legislation on the Senate floor, provided that no other senator objects.
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Who influenced it?
The new tip deduction only applies to cash tips that meet both the following conditions:
- The tips are received by employees who work in professions where tips are common.
- The tips are reported to the employer for wage tax assessment purposes.
(According to current legislation, employees must report tips of a total of more than $ 20 a month to their employer.)
Employees whose annual wage exceeds a specified threshold in the previous tax year – $ 160,000 in 2025, adapted annually for inflation – are not eligible to claim the new tip deduction.
When does it come into force?
The bill has only adopted the Senate, which means that it has not yet become a law. If the bill becomes law, the Minister of Finance has 90 days to offer legislators a list of professions that have customary tips from December 31, 2023.
The bill would take effect for all the taxable years that start after December 31, 2024.
What people say
Senator Jacky Rosen Said in her floor remarks: “Nevadans, our families, are pressed and we need real lighting. For some, many service and hospitality workers, tips are not extra, it is part of their income that they use to make ends meet.”
Senator Ted Cruz Said on the Senate Floor: “Whether it is detached or as part of the larger bill, somehow, ‘no tax on tips’ will become law and give real relief to hard -working Americans. So I am proud of what the Senate just did, and I recommend Democrats and Republicans, even in a time of party, division.
Senate minority leader Chuck Schumer Said in a statement seen by NBC News: “working Americans-from servers, to barnans, delivery stores and everything in between hard for every dollar they earn and are those who earn tax relief, not the ultra-rich. While President Trump and Republicans are holding the middle-class with the middle-class with the middle-class with the middle-class cashese with the middle-class cash sasse with the middle-class cash sasse and the middle classse with the middle classes with the middle classes with the middle classes with the middle-class cashesse and the middle classes with the middle-class bass lasse and the middle-class cash sasse and the middle-class bass lasse and the middle-class cashesse and the middle-class cash sasse. The middle class with the middle class with the middle class with the middle class with the middle class with the account of the account of the account of the account of the account of the account, are Senate Democrats that protect the employees of America. “
What happens afterwards
The bill is now going to the House of Representatives.
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