'No tax on tips': what the law actually does
The 2025 tax law created a temporary deduction, not an exemption. Many low-wage tipped workers owe little income tax to begin with.
The 2025 tax law lets workers deduct up to $25,000 in qualified tips from federal income tax for 2025 through 2028, with the benefit shrinking for higher earners. Tips are still subject to Social Security and Medicare payroll taxes. Because many tipped workers earn too little to owe much federal income tax, analysts say the benefit for them is small. The overtime and senior provisions work the same way: temporary deductions, not eliminated taxes.
In his first term, Trump's Labor Department proposed a rule that would have let employers pool and control tips, which drew bipartisan opposition before Congress blocked the most controversial part.
The receipts
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Vox (as shared in our notes) byline on original
Who owns the tip? Trump's Labor Department tip rule, explained (2018)MSN (as shared in our notes) byline on original
Trump's no tax on tips promise is falling flat with Las Vegas workersMSN (as shared in our notes) byline on original
Newly passed bill: who benefits from the tips, overtime and Social Security changes