No Tax on Tips Act

This bill would let workers who receive cash tips subtract those tips from their taxable income, up to $25,000 a year, as long as the tips are reported to their employer. It applies only to jobs that already commonly received tips by December 31, 2023. High‑earning employees cannot use this deduction if they made more than a set amount from the same employer the year before ($160,000 for 2025, adjusted each year).

It also expands an existing employer tax credit. Salons and spas can get a credit for the payroll taxes they pay on employees’ tips, covering barbering and hair care, nail care, esthetics, and body and spa treatments (similar to what restaurants already use for food and beverage tips).

Key points:

• Who is affected: Employees who get cash tips in occupations that customarily received tips by 12/31/2023; beauty industry employers (salons and spas).
• What changes: New personal tax deduction for cash tips reported to an employer, capped at $25,000; expanded payroll‑tax credit for tips in beauty services.
• Limits: Only cash tips qualify; workers with high prior‑year pay from the same employer cannot claim the deduction ($160,000 in 2025, inflation‑adjusted).