Sponsors
The bill provides temporary, targeted tax relief and clearer reporting for tipped workers and employers, but does so in a way that reduces federal revenue, excludes many middle‑income and some vulnerable tipped workers, and creates short‑term uncertainty and compliance burdens.
Low-income tipped workers who report tips can deduct up to $35,000 of tips from taxable income, lowering federal tax liability for the covered tax year(s).
Tipped workers may keep more of their earnings, increasing take-home pay and potentially reducing reliance on public assistance.
Employers and payroll filers receive clearer reporting rules (including a 90‑day list of qualifying occupations), and Treasury reporting and pilot requirements will generate data to evaluate workforce participation and wage equity.
Allowing a large tip deduction could reduce federal revenues, potentially increasing deficits or requiring cuts to other programs.
The benefit is unavailable to taxpayers with MAGI above the stated thresholds (>$75,000 single, >$150,000 joint), excluding many middle‑income households and making the provision regressive.
The deduction is temporary (effective starting in 2026 for a limited period), creating short‑term uncertainty for workers and small businesses about long‑term tax treatment.
Based on analysis of 2 sections of legislative text.
Creates a temporary federal tax deduction (up to $35,000) for certain reported cash tips, with income-based phaseouts, for a limited period.
Introduced November 25, 2025 by Don Davis · Last progress November 25, 2025
Allows taxpayers who receive reported cash tips to claim a temporary tax deduction for those tips (up to $35,000 per year). The deduction is phased out for higher earners, is limited by rules for self-employed tip earners, is subject to Treasury guidance and adjustment, and applies for taxable years beginning after Dec 31, 2025 through taxable years beginning before Jan 1, 2029.