“Unexpected,”reports both NBC News and Fox Business. The ‘No Tax on Tips’ bill, originally introduced in January establishing a federal tax deduction for most workers of up to $25,000 for tips, passed unanimously in the Senate on May 20, 2025.

The bill states that cash tips—as well as credit card, debit card, and check tips—received by an employee in an occupation that typically receives tips, such as in hospitality or restaurant work, and tips reported by the employee to their employer for purposes of withholding payroll taxes will be eligible for the tax deduction. Employees whose annual pay exceeds a specified threshold in the previous tax year—$160,000 in 2025, adjusted annually for inflation—would not be eligible to claim the new tip deduction.

Under current law, employees receiving tips over $20 per month are required to report them to their employer.

Among others, the hotel industry and restaurant association applaud the policy change with the National Restaurant Association indicating, “More than 2 million tipped servers and bartenders work in the restaurant and foodservice industry.”

US Senate passage of the ‘No Tax on Tips’ Act was introduced as a bipartisan bill by Sen. Jacky Rosen (D-Nev.), and now heads to the House of Representatives.