The IRS No Tax on Tips Act 2025 is officially known as S.129. This is a new law passed by the U.S. Senate. This act was designed to give service industry workers more financial relief by making a large portion of their tips free from the federal income tax. These service industry workers include restaurant servers, bartenders, and beauty salon employees. Until now, all tips reported to the IRS were considered taxable. This reduces the take home pay of the workers who heavily rely on the tips as part of their Salary.
IRS No Tax on Tips Act 2025
With the IRS No Tax on Tips Act 2025 qualifying employees can now deduct up to $25,000 in reported cash tips each year from their taxable income. This means more money stays in the workers pocket instead of going to the IRS. This act applies only to reported tips. These reported tips are the tips that are declared to the employer and subject to the payroll taxes. To prevent the misuse, the law sets clear rules that workers must earn under $1,60,000 in the prior year to qualify and the jobs must fall into categories where tipping was customary before 2024.
S.129 No Tax On Tips Act – Key Highlights
| Post Title | IRS No Tax on Tips Act 2025 |
| Year | 2025 |
| Country Name | United States |
| Act Name | IRS No Tax on Tips Act |
| Bill Number | S.129 |
| Deduction Limit | $25,000 |
| Current Status | Passed In Senate, Pending House |
| Who Qualifies | Service Workers in the U.S. |
| Income Limit | $1,60,000 |
| Category of the Post | Finance |
| Official Web Portal | www.congress.gov |
$25,000 Tips Deduction Eligibility 2025
To benefit from the no tax on tips bill of 2025, the following criteria should be matched:
- The employee should work in a tipped occupation which means the restaurant servers, nail technicians, bartenders, hairdressers, spa workers, and delivery staff qualify for this.
- Only tips that are reported to the employer and are subject to payroll deductions are qualified.
- The worker’s earned income should be $1,60,000 per annum or less in the previous year. This limit adjusts each year for inflation.
- The official list of jobs that will be qualified will soon be released when this act is fully approved.
- The maximum deduction workers can claim is $25,000 per year. Any tip over this amount would be taxed.
Important Note: Check the full eligibility rules when this act would officially be approved and becomes a law in the United States.
No Tax On Tips Act Effective Date 2025
If this act is approved and becomes a law then this will officially take effect from 1st Jan, 2025. This means that any qualifying tips on or after this date will be fully exempt from the federal income tax. But it’s important to note that only tips tax up to $25,000 can be deducted. As of now, this act has not been fully approved and become the law.
U.S. No Tax On Tips Act Timeline 2025
Check out the latest actions on this new act and look whether approved or not:
- Officially Introduced On: 16 Jan 2025
- Passed In Senate On: 20 May 2025
- Received In House On: 26 May 2025
- Passed In House: Pending
- Sent to President: Pending
- Become a Law: Pending
To look at full actions and updates on this new bill, refer to the official congress.gov web portal.
FAQs Related To IRS No Tax on Tips Act 2025
- What is Senate Bill S.129?
- Senate Bill S.129 is the legislative proposal behind the IRS No Tax on tips act of 2025 which ensures that tips are exempt from federal taxation.
- When will the Senate Approved No Tax on Tips Act be effective?
- No Tax on Tips Act 2025, if approved, will be applicable from 1st Jan 2025. This would cover all tips received from 1st Jan 2025.
- Who Qualifies for the tax exemption under the Senate Approved No Tax on Tips Bill?
- Eligible US residents who legally get the tips and in the field of service workers qualify for the tax exemption under the Senate Approved No Tax on Tips bill.
- Is the U.S. No Tax on Tips Bill approved?
- No, as of now, the U.S. No Tax on Tips Bill just passed in the senate but requires house approval.
- Where can US workers know full updates on the No Tax on Tips Act 2025?
- U.S. Workers can know full updates on the No Tax on Tips Act 2025 via the official congress.gov web portal.
