Tipped workers in the U.S. could see significant changes to their taxes after Congress approved President Trump’s legislative agenda on Thursday. This week, the GOP-controlled Senate and House narrowly passed the One Big Beautiful Bill Act — a massive spending and tax package that creates limited and temporary tax exemptions for tips, among other tax cuts.
Once the provision goes into effect, workers will be able to deduct $25,000 in tips annually from their taxable income. After that, tips will be federally taxed.
“If you look at the data on tipped income, that would cover the majority of individuals earning tips in the United States,” said Garrett Watson of the Tax Foundation, an organization that advocates for simplifying the tax code in pursuit of economic growth.
