Tip Tax Termination Act

This bill would temporarily stop federal income taxes on a portion of tips for people in tip-based jobs. It lets workers leave out up to $20,000 in eligible tips from their taxable income each year, through the end of 2029. Jobs that generally rely on tips—like food service, hospitality, and cosmetology—are included. The IRS would update paycheck withholding to reflect this change.

Excluded tips generally can’t be used again to claim extra tax breaks. However, they still count when you figure the Child Tax Credit and the Earned Income Tax Credit. The change only applies to tips received before 2030.

Key points:

• Who is affected: Workers in tip-based jobs (restaurants, hotels, salons, and similar).
• What changes: Up to $20,000 in tips per year would not be taxed as federal income; IRS will adjust withholding .
• Credits: These tips still count for the Child Tax Credit and Earned Income Tax Credit.
• When: Applies to tips received through 2029 .