The 'No Tax on Tips' proposal could impact tipping culture and provide relief to servers

From Yahoo Finance: 2025-07-01 17:01:00

The Trump administration’s “No Tax on Tips” proposal aims to make all tips income tax-exempt for servers, giving them a tax break on gratuities up to $25,000 from federal income tax. Critics worry it could harm more workers than help, while supporters see it as a financial lifeline. The bill may impact not just workers and employers, but also tipping culture for customers.

Under the proposal, only cash tips reported for payroll taxes would qualify for deductions, excluding those earning over $160,000. Employers could claim a credit on payroll taxes for tips in beauty services establishments. The bill is being incorporated into a larger tax bill being negotiated in Congress.

The No Tax on Tips Act could lead to changes in tipping norms and culture, affecting not just workers but customers as well. Critics fear it may result in tip fatigue and backlash, while supporters believe it will provide much-needed financial relief to servers. The proposal has sparked debate over its potential impact on the industry.

Read more: How ‘No Tax on Tips’ Could Affect You as Both a Server and a Customer