Sponsors (31)
The bill increases protections and take‑home pay for many tipped workers (through higher minimum pay, preserved tip rights, stronger remedies, and a broad above‑the‑line deduction) at the cost of higher labor and compliance costs for employers, greater litigation exposure, potential price/staffing impacts, and exclusion of some workers from the tax benefit.
Tipped workers (servers, bartenders, cosmetologists and similar) would be paid at least the statutory minimum wage rather than a lower tipped cash wage, increasing base earnings for many low‑income employees.
Many tipped workers who report cash tips (including non‑itemizers) can take an above‑the‑line deduction for qualified tips, reducing taxable income and increasing take‑home pay; the deduction is protected from the 2% miscellaneous floor and overall itemized deduction limits.
Tipped employees would retain the right to keep all their tips (while allowing tip pools among regular tip‑earning staff), protecting workers' direct tip income from employer appropriation and clarifying acceptable pooling.
Businesses that rely on tipping (especially small restaurants and bars) would face higher direct labor costs from being required to pay the statutory minimum wage rather than a lower tipped cash wage, which could lead employers to reduce staffing or hours for tipped roles and/or raise prices for customers.
Employers face increased litigation exposure and potentially larger damages liability for misuse of tips because damages are tied to the full amount of tips unlawfully used or kept, raising legal and financial risk for businesses.
The tax benefit excludes individuals with AGI above $112,500 and the bill's narrow definition of "qualified tips" may exclude some legitimate tipped workers, so higher‑earning tipped workers and some occupations could receive no tax benefit and fairness/predictability concerns remain.
Based on analysis of 3 sections of legislative text.
Requires full federal minimum wage for tipped workers, strengthens employer liability for misused tips, and creates an above-the-line tax deduction for reported cash tips (effective 2026).
Introduced February 13, 2025 by Steven Horsford · Last progress February 13, 2025
Ends the federal “tipped” subminimum wage by requiring employers to pay tipped workers the full statutory minimum wage and preserves workers’ right to keep tips while allowing tip-pooling among employees who customarily receive tips. It also strengthens remedies so employers must repay any tips they unlawfully use. Creates a new above-the-line federal tax deduction for cash tips that employees report to their employer, available to non‑itemizers and capped for higher earners, and requires Treasury to update withholding rules; the tax changes take effect for taxable years beginning after Dec. 31, 2025.