What You Need to Know About the “No Tax on Tips” Provision in the One Big Beautiful Bill Ac
A New Dawn for Tipped Workers
Earlier this summer, service workers across the nation received welcome news: the enactment of the One Big Beautiful Bill Act (OBBBA) has ushered in a widely anticipated tax relief measure—the “No Tax on Tips” provision.
Signed into law on July 4, 2025, by President Donald Trump, OBBBA rolls back trillions in expiring tax cuts and introduces targeted deductions—including a powerful break aimed specifically at tipped workers.
What’s in It for Tipped Workers?
Under the new law, eligible service workers can deduct up to $25,000 of their cash tip income from federal taxable income—starting with earnings in 2025 (tax returns filed in 2026).
To qualify, a worker must:
- Earn cash tips (note: digital tips like credit card or app-based ones are still taxable)
- Make under $150,000 individually or $300,000 jointly, with deductions phasing out above those thresholds
The IRS and Treasury have released a preliminary list of 68 occupations eligible for this deduction—spanning traditional service roles like waitstaff and bartenders, as well as unexpected ones like podcasters, influencers, wedding planners, electricians, and gaming workers.
What Jury Is Still Out: Real Impact and Criticism
While the law has generous intent, its real-world impact is mixed:
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