(NewsNation) — Eliminating taxes on the tips employees receive on the job was a campaign promise President Donald Trump touted in cities like Las Vegas, and it’s closer to becoming a reality under his administration.
There is cautious optimism on the part of Rep. Vern Buchanan, R-Fla., that no tax on tips will become law as part of the federal budget reconciliation currently being negotiated.
If it doesn’t make the cut, there is still hope for an issue that has led to unexpected political bedfellows and two bills in the House that could address the topic.
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Buchanan has sponsored the No Tax on Tips Act, and Rep. Steven Horsford, D-Nev., has introduced the Tipped Income Protection and Support Act.
Versions of both House bills were written after Trump first expressed his support for eliminating the tax on tips in June of 2024. He proposed the concept as he was campaigning for a second presidential term in Nevada, a state in which many service industry workers rely on tips to supplement their income.
There is a companion bill in the Senate introduced by Texas Republican Sen. Ted Cruz, also called the No Tax on Tips Act, that essentially mirrors Buchanan’s House bill. Nevada’s Sens. Jacky Rosen and Catherine Cortez Masto are co-sponsors.
“A tip is a gift — it’s not a guarantee. It’s not something that service employees can bank on. And it’s not something that should be taxed,” Horsford said at a recent news conference. Since servers are dependent on customers’ generosity, he said people who survive on tips are truly just surviving.
Both House bills call for an end to taxes on tips and similarly define a tipped worker as someone who works in hospitality, such as serving food or drinks, or cosmetology, such as providing hair care, nail care and spa treatments.
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Horsford said the bill aims to proactively close a potential loophole that could have led wealthy Americans to give money to family members tax-free by claiming it as a tip.
There are some key differences between the two bills.
Horsford’s TIPS Act would not only eliminate the federal tax on tips, but it would also eliminate the federal subminimum wage of $2.13 an hour for service-industry employees who are expected to supplement their income with tips.
In 2024, Nevada eliminated its two-tiered hourly wage; the minimum wage for all workers, including tipped workers, is now $12 an hour. However, subminimum wages still exist in other states.
Buchanan’s bill exempts taxes on tips up to $25,000, while Horsford’s bill does not have a cap. Both bills have exclusions for high-earning employees.
But, under Buchanan’s bill, a tipped employee would have to pay taxes if they made more than $160,000 in 2025, whereas with Horsford’s bill, anyone making more than $112,000 would have to pay taxes.
Despite his own bill, Horsford said he is co-sponsoring Buchanan’s legislation because it provides another “opportunity for us to eliminate the income tax requirement for most tipped workers and ensure that bad actors can’t use it in inappropriate ways.” It also has a better chance of passing in a Republican-led House.
Buchanan told NewsNation he is “very encouraged by the positive feedback we’ve received so far regarding my no tax on tips bill from everyday Floridians and folks throughout the country who rely on tipped wages to help ends meet.”
He said the passage of the bill would help millions of Americans, no matter what state they are in.
