Senate passes bill that will save millions of hardworking service industry employees from paying federal income tax on their tips, following through on a key Trump campaign promise while adding protections to ensure the wealthy don’t abuse the system.
Key Takeaways
- The Senate unanimously passed the “No Tax on Tips Act,” exempting tipped wages from federal income tax with deductions capped at $25,000
- The bipartisan bill was introduced by Senators Jacky Rosen (D-NV) and Ted Cruz (R-TX) and fulfills a campaign promise made by President Trump
- Only traditionally tipped employees earning less than $160,000 annually will qualify, ensuring benefits target working-class Americans
- Nevada, with its high concentration of service industry workers, stands to benefit significantly from this tax relief
- The bill now moves to the House of Representatives, where Democrats want it passed as a standalone measure rather than part of a larger package
Bipartisan Bill Fulfills Trump’s Campaign Promise
In a rare display of bipartisan cooperation, the U.S. Senate unanimously passed the “No Tax on Tips Act,” a legislative initiative that will exempt service industry workers’ tips from federal income taxation. The bill, championed by Senators Jacky Rosen (D-NV) and Ted Cruz (R-TX), represents a significant policy win for President Trump, who first proposed the idea during a campaign stop in Las Vegas. The legislation specifically targets relief for America’s service workers by allowing them to deduct their tip income from federal taxes, with deductions capped at $25,000 annually.
“No tax on tips was one of President Trump’s key promises to the American people, which he unveiled in my state of Nevada. And, I am not afraid to embrace a good idea, wherever it comes from,” said Senator Rosen.
— Tom Emmer (@GOPMajorityWhip) May 20, 2025
Targeted Relief with Carefully Designed Limitations
The carefully crafted legislation includes important guardrails to ensure tax relief benefits those who truly need it. The bill specifically excludes employees earning more than $160,000 annually from receiving these deductions, preventing wealthy individuals and CEOs from taking advantage of the tax break. This protection ensures the policy achieves its intended purpose of helping working-class Americans in the service industry rather than becoming another tax loophole for the wealthy. Nevada, with its tourism-driven economy and high concentration of tipped workers, stands to benefit substantially from this targeted tax relief.
“If we are serious about providing service employees with financial relief, let’s do it now, let’s do it today!” said Rosen.
The legislation represents a significant victory for service industry workers nationwide, providing immediate financial relief to those who often work long hours for modest pay. By eliminating federal income tax on tips up to $25,000, the bill effectively delivers a substantial pay increase to millions of Americans working in restaurants, hotels, casinos, salons, and other service-oriented businesses where tipping is customary. This policy acknowledges the unique financial challenges faced by service workers whose incomes often fluctuate based on customer generosity.
Legislative Path Forward May Face Hurdles
Despite unanimous Senate support, the bill’s path forward remains complicated. House Republicans have already included a version of the “No Tax on Tips” legislation in a larger budget proposal that contains controversial cuts to programs like Medicaid and SNAP. Senator Rosen has criticized this approach, arguing the service industry relief should be passed as a standalone measure. This political maneuvering highlights how even broadly supported policies can become entangled in larger partisan disputes about government spending and priorities.
“We shouldn’t be forcing working families to choose between keeping their health care or keeping their tips,” stated Rosen.
Senator Cruz has expressed confidence that the “No Tax on Tips” will ultimately become law, either as a standalone bill or as part of a larger package. The legislation represents a rare policy area where President Trump’s agenda has found support across party lines, demonstrating that pragmatic economic relief measures focused on working Americans can still overcome Washington’s typical partisan gridlock. If passed, this bill would provide meaningful financial assistance to service workers who form the backbone of hospitality and tourism sectors across America.
