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Senate Passes Bill to Cut Taxes on Tips: Here's Everything You Need to Know

  • The U.S. Senate unanimously passed the No Tax on Tips Act in May 2025 to eliminate federal income taxes on reported tips for eligible workers.
  • The measure follows President Trump's campaign pledge to end taxes on tips, aimed at aiding working-class voters amid rising costs, with bipartisan and employer support.
  • The bill proposes an income tax deduction for tipped workers earning below $160,000 in 2025, allowing them to exclude up to $25,000 of their cash tips from federal taxes, and also broadens employer payroll tax credits to cover additional service industries such as barbering, nail care, and spa treatments.
  • Congressional analysts estimate the provision will increase the federal deficit by $40 billion through 2028, while one advocacy group projects a $120 billion cost over ten years if permanent.
  • The act may provide moderate tax relief to some service workers and help recruitment, though experts and advocates warn it could increase inequities and distract from raising the minimum wage.
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NBC Dallas-Fort Worth broke the news in Fort Worth, United States on Wednesday, May 21, 2025.
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