In a significant legislative move, the Senate has now reportedly unanimously approved the ‘No Tax On Tips Act,’ a bill spearheaded by Senator Ted Cruz (R-TX) that fulfills a campaign promise made by President Donald Trump.
The passage of this bipartisan legislation on May 20, 2025, reflects a rare moment of agreement in a divided Congress.
The bill aims to alleviate the tax burden on workers in tip-heavy industries, allowing them to deduct up to $25,000 in reported cash tips from their taxable income, provided their earnings do not exceed $160,000 annually.
This threshold will be adjusted for inflation in subsequent years. Additionally, the legislation expands business tax credits to cover payroll taxes on tips in beauty services, including haircare and spa treatments.
Cruz emphasized the importance of the bill in a statement, highlighting its potential impact on millions of Americans who rely on tips to make ends meet.
“This legislation will protect the hard-earned dollars of blue-collar workers, the very people who are living paycheck-to-paycheck,” he stated.
He also called on House members to expedite the bill’s passage to send it to the President for approval.
The unanimous consent required for the bill’s swift passage was unexpected. Earlier in the day, it was reported that Senate Republicans might block the measure due to ongoing negotiations surrounding a larger legislative package, which includes its own provisions for tax deductions on tips.
However, the anticipated opposition did not materialize, allowing for a smooth approval process.
The ‘No Tax On Tips Act’ not only exempts cash tips from federal income tax but also allows taxpayers to claim a full deduction at filing for tipped wages.
Cruz’s office noted that the bill includes safeguards to ensure that only traditionally tipped employees benefit from these tax breaks, aiming to address concerns about fairness and fiscal responsibility.
This legislative win comes as part of broader efforts within the GOP to align with Trump’s domestic priorities, which include tax cuts and increased funding for various programs.
The House is currently working on a larger reconciliation bill that encompasses these goals, including provisions for overtime tax exemptions and relief from auto loan interest taxes.
Interestingly, the push for the ‘No Tax On Tips Act’ has garnered some bipartisan support, with Democrats joining Republicans in advocating for its passage.
Former vice president Kamala Harris, recognizing the proposal’s popularity, even echoed similar sentiments during her failed campaign.
As the bill moves to the House, it remains to be seen how it will fare amidst the ongoing negotiations for the larger legislative package.
Advocates hope that it will clear the final hurdles and become law, providing much-needed relief to workers in service industries across the nation.
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