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Amends 26 U.S.C. 45B to expand the lines of business whose customer tips are taken into account to include beauty services and to add a new subsection defining 'beauty service' (barbering and hair care; nail care; esthetics; body and spa treatments).
Technical amendment to 26 U.S.C. 45B(b)(1)(B) as shown: striking a semicolon and inserting text after a period (specific inserted text not shown in this section).
Redesignates existing 26 U.S.C. 224 as section 225 and inserts a new 26 U.S.C. 224 defining a deduction for 'qualified tips' with a $25,000 annual cap and related definitions and exclusions.
Amends 26 U.S.C. 63(b) to add the deduction provided in new section 224 to the list of deductions for individuals who do not itemize.
Amends 26 U.S.C. 67(b) to add the deduction under new section 224 to the list of items excluded from miscellaneous itemized deductions subject to the 2% floor.
Amends 26 U.S.C. 68(c) to exclude the deduction under new section 224 from the overall limitation on itemized deductions.
This proposal would let workers who receive tips subtract up to $25,000 of qualified tips from their taxable income each year. Only cash tips count, and they must be tips you reported to your employer under the usual tip‑reporting rules. Jobs must already have been tip‑based on or before December 31, 2023, as set by the Treasury Department. High earners could not use this; if you made $160,000 or more from that employer in the prior year (amount adjusts each year), you would not qualify.
It would also expand an existing business tax credit that helps employers cover their share of payroll taxes on tips. Today that credit applies to tips related to food and drinks; this bill would add tips in beauty services like barbering, hair care, nail care, esthetics, and spa treatments.
Referred to the House Committee on Ways and Means.
Introduced January 16, 2025 by Vernon G. Buchanan · Last progress January 16, 2025
No Tax on Tips Act