Senate Advances "No Tax on Tips" Act

In a rare show of bipartisan unity, the Senate unanimously passed the "No Tax on Tips Act" in May 2025.

Spearheaded by lawmakers aiming to support service industry workers, the bill would exempt up to $25,000 per year in tip income from federal taxation.

Supporters say it offers needed relief to millions of hospitality and gig workers hit hard by inflation and inconsistent earnings.

Critics argue it could complicate tax reporting and disproportionately benefit higher-earning service staff.

The measure still requires House approval and IRS implementation guidance, but early signs suggest broad public and political support.

If passed into law, it would mark one of the most significant changes to taxable income rules in decades.

Labor unions and restaurant groups have praised the bill, while tax experts raise questions about how the exemption will be tracked and enforced.