“These workers deserve to keep more of what they earn,” Cruz stated. Rosen highlighted the importance for states with tourism-heavy economies, saying the bill gives service workers “the respect and support they deserve.” Under current law, tipped employees must report all tips as taxable income, and employers are required to withhold federal taxes.
If enacted, the No Tax on Tips Act would allow workers to report tips for recordkeeping purposes but exempt them from federal taxation. The change would apply only to tips—not wages, salaries, or employer-paid bonuses. Supporters say the measure simplifies reporting, reduces burdens on businesses, and boosts take-home pay for workers.
The bill has received strong support from advocacy groups and service employees, many of whom could see significant annual savings. Some tax experts have raised questions about enforcement and Social Security contributions, but lawmakers argue these challenges are manageable. Having passed the Senate, the legislation now moves to the House of Representatives for debate. Advocates remain optimistic that the bill could become law, marking a historic step in supporting the millions of Americans whose livelihoods depend on tipping. If approved, the No Tax on Tips Act would represent not only financial relief but also recognition of the vital role service workers play in the nation’s economy.
