By David Tashjian, President | Tippy
Tuesday evening the Senate unexpectedly passed the No Tax on Tips Act in a unanimous vote (100-0), occurring in a surprisingly non-partisan fashion and giving unexpected strength to its chances of success in becoming law. Then this morning the House successfully passed the full Reconciliation Act, including the No Tax on tips Act. The bill now will take its course back through the Senate (and back to the House again if any changes). While there are still some hurdles to finalization, the odds of successful completion have increased substantially. Thus, we wanted to share below our updates on what this will mean for the Beauty Industry.
THE BILL:
Bill S. 129, or the No Tax on Tips Act, creates a federal income tax deduction of up to $25,000 a year for certain types of tips for eligible employees.
- Bill S. 129, or the No Tax on Tips Act, creates a federal income tax deduction of up to $25,000 a year for certain types of cash tips for eligible employees.
- “Cash tips” in the bill is defined to include cash as well as credit, debit and other digital tipping methods.
- The bill was brought up Tuesday for “unanimous consent” — a type of vote usually reserved for routine congressional matters.
- Democrats and Republicans praised the speedy passage of the bill and framed it as an example of successful bipartisanship. The legislation, as part of the broader bill, then passed the House today.
- A link to the formal Congressional Bill and summary is provided here: https://www.congress.gov/bill/119th-congress/senate-bill/129/all-info
THE FACTS:
This bill establishes a new tax deduction of up to $25,000 for tips, subject to limitations. The bill also expands the business tax credit for the portion of payroll taxes an employer pays on certain tips to include payroll taxes paid on tips received in connection with certain beauty services. As it’s currently structured, the bill is retroactive to January 1st of 2025.
Under the bill, the new tax deduction for tips is limited to tips (1) received by an employee during the course of employment in an occupation that customarily receives tips, and (2) reported by the employee to the employer for purposes of withholding payroll taxes.
Further, an employee with compensation exceeding a specified threshold ($160,000 in 2025 and adjusted annually for inflation) in the prior tax year may not claim the new tax deduction for tips.
Finally, the bill expands the business tax credit for the portion of payroll taxes that an employer pays on certain tips to include payroll taxes paid on tips received in connection with barbering and hair care, nail care, esthetics, and body and spa treatments. (Under current law, an employer is allowed a business tax credit for the amount of payroll taxes paid on certain tips received by an employee in connection with providing, delivering, or serving food or beverages.)
NEXT STEPS:
We will continue to keep you well informed of the bill’s progress and couldn’t be more excited about its progress to-date.
If you’re currently a Tippy user …. there’s nothing else to do at this point – congratulations and you are all set for success!
If you don’t have Tippy yet ….. it’s time to click the link below and get started with higher tips, no processing fees, instant disbursements, and to be prepared with all the proper reporting to help you take full advantage of this exciting new potential bill!