U.S. Senate Eliminates Federal Taxes on Tips in Unanimous, Game-Changing Vote

U.S. Senate Eliminates Federal Taxes on Tips in Unanimous Vote. In a surprising and swift decision, the U.S. Senate eliminated federal taxes on tips, passing the “No Tax on Tips Act” unanimously. This bipartisan bill, first introduced in January 2025, has garnered significant attention since former President Donald Trump campaigned on the idea during the 2024 election season.

U.S. Senate Eliminates Federal Taxes on Tips: What the Bill Includes

The legislation allows workers to deduct up to $25,000 in cash tips reported to employers for payroll tax withholding. This tax benefit is limited to employees earning $160,000 or less in 2025, with that cap increasing annually to match inflation. The change marks a substantial shift in how tipped income is treated under federal tax law.

Bipartisan Support as U.S. Senate Eliminates Federal Taxes on Tips

Introduced by Sen. Ted Cruz (R-Texas) and supported by a bipartisan group—including Democratic Senators Jacky Rosen and Catherine Cortez Masto from Nevada—the bill saw rare cross-party agreement. Senator Rosen initiated the unanimous consent request that led to its passage, a method usually reserved for less controversial legislation.

“Nevada has more tipped workers per capita than any other state,” said Rosen. “This move provides immediate relief for working families.” She also acknowledged that the concept was originally introduced by President Trump during a campaign stop in her state.

U.S. Senate Eliminates Federal Taxes on Tips: Next Steps

Now that the U.S. Senate has eliminated federal taxes on tips, the bill heads to the House of Representatives for further consideration. If approved there, it will head to the president’s desk for final signing.

Additionally, the Department of the Treasury is required to release a list of professions that traditionally earn tips within 90 days of the bill’s enactment. This ensures clarity on who qualifies for the new tax break.

Mixed Reactions as U.S. Senate Eliminates Federal Taxes on Tips

While the bill has won bipartisan praise, not everyone supports it. Economists and labor experts argue that this change could disproportionately benefit higher earners within the tipped workforce. According to the Brookings Institute, around 37% of tipped workers already pay no federal income tax due to low wages.

Critics also point out that increasing the minimum wage would provide a more meaningful boost for workers than tax breaks on tips. Lena Simet from Human Rights Watch stated, “Without a strong wage floor, tipped workers remain vulnerable to inequality and exploitation.”

Trump and Harris Endorsed the Concept Before U.S. Senate Eliminates Federal Taxes on Tips

Donald Trump brought the idea into the spotlight during his 2024 presidential campaign. Surprisingly, Vice President Kamala Harris also expressed support, helping the proposal gain bipartisan momentum. Sen. Cruz praised the collaboration: “In a divided political climate, this is a win for workers across America.”

Conclusion: What It Means That the U.S. Senate Eliminates Federal Taxes on Tips

The fact that the U.S. Senate eliminated federal taxes on tips signals a significant shift in tax policy for the service industry. While the bill still needs to clear the House, its unanimous Senate passage is a major milestone in American tax reform and could soon offer real financial relief for millions of tipped workers nationwide.