To amend the Internal Revenue Code of 1986 to eliminate the application of the income tax on qualified tips through a deduction allowed to all individual taxpayers, and for other purposes.
Sponsors
Legislative Progress
Passed SenateMr. Cruz (for himself, Mr. Daines, Ms. Rosen, Mr. Ricketts, …
Passed Senate (inferred from es version)
Summary
What This Bill Does
This bill eliminates income tax on tips for workers in traditionally tipped jobs by creating a new tax deduction of up to $25,000 per year. It also extends the existing employer tip tax credit (Section 45B) to cover beauty service establishments in addition to food service.
Who Benefits and How
Tipped workers (servers, bartenders, hairstylists, barbers, nail technicians, spa workers) can deduct up to $25,000 of tip income from their taxable income, reducing their federal tax burden. Beauty service employers (salons, spas, barbershops) gain access to the tip tax credit previously only available to food/beverage establishments. High earners (compensation over ~$155,000) are excluded from the tip deduction.
Who Bears the Burden and How
Federal Treasury/taxpayers lose tax revenue from the deduction and expanded tip credit. The Joint Committee on Taxation would need to score the revenue impact.
Key Provisions
- Creates new IRC Section 224 allowing deduction for qualified tips up to $25,000/year
- Limits deduction to workers in occupations that customarily received tips as of Dec 31, 2023
- Excludes high-income employees (over $155K compensation threshold)
- Extends Section 45B employer tip credit to beauty services (barbering, nail care, esthetics, spa treatments)
- Effective for tax years beginning after December 31, 2024
Evidence Chain:
This summary is derived from the structured analysis below. See "Detailed Analysis" for per-title beneficiaries/burden bearers with clause-level evidence links.
Primary Purpose
Creates a federal income tax deduction of up to $25,000 for cash tips received by workers in traditionally tipped occupations, and extends employer tip tax credits to beauty service establishments.
Policy Domains
Legislative Strategy
"Provide tax relief to lower/middle-income tipped workers while excluding high earners; expand existing employer incentive to new industry sector"
Bill Structure & Actor Mappings
Who is "The Secretary" in each section?
- "the_secretary"
- → Secretary of the Treasury
Key Definitions
Terms defined in this bill
Barbering and hair care, nail care, esthetics, and body and spa treatments
Any cash tip received by an individual in employment in an occupation which traditionally and customarily received tips on or before December 31, 2023, as provided by the Secretary
We use a combination of our own taxonomy and classification in addition to large language models to assess meaning and potential beneficiaries. High confidence means strong textual evidence. Always verify with the original bill text.
Learn more about our methodology