"Tucked away among the 940 pages of President Donald Trump's massive One Big Beautiful Bill Act (OBBBA) are an array of new tax write-offs, exemptions that Trump promised to enact while running for a second term. Those include a provision of the No Tax on Tips Act. This provision of the OBBBA, which narrowly passed the Senate, and Trump signed into law in July, gives taxpayers the ability to deduct income from tips and overtime pay."
"For workers, it creates new tax deductions of up to $25,000 on income made from cash tips, and tips workers report to employers withholding payroll taxes. Eligible employees (see list below) that make up to $160,000 in 2025 qualify. (Going forward, that limit will be adjusted each year for inflation.) For employers, it also expands the business tax credit for the portion of payroll taxes that an employer pays on certain tips, to include payroll taxes paid on tips received in connection with certain beauty services."
The One Big Beautiful Bill Act includes a No Tax on Tips provision that lets taxpayers deduct income from tips and overtime pay through the end of 2028. The provision creates deductions of up to $25,000 for cash tips and employer-reported tips for eligible employees, with a 2025 income eligibility cap of $160,000 that will be adjusted annually for inflation. The measure also expands an employer business tax credit to cover payroll taxes paid on certain tipped income, including specified beauty services. Treasury has identified 68 qualifying occupations spanning beverage and food service, entertainment, and events, with a preliminary list to be published in the Federal Register.
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