In a rare moment of bipartisan unity, the U.S. Senate has unanimously approved the “No Tax on Tips Act,” a bill designed to exempt tip income from federal income tax. The measure, co-sponsored by Sen. Ted Cruz (R-TX) and Sen. Jacky Rosen (D-NV), aims to provide meaningful financial relief to millions of American workers who rely on gratuities for a large part of their income.
If enacted into law, the bill would allow service industry workers—such as servers, bartenders, delivery drivers, and hotel staff—to keep 100% of the tips they earn without having to pay federal income tax on that portion of their earnings. Tip income would still be reported, but it would no longer be taxed at the federal level.
Sen. Cruz called the legislation “common sense,” noting that tipped workers often rely on every dollar to make ends meet. “They work hard, and they deserve to keep what they earn,” he said. Sen. Rosen echoed that sentiment, adding that in tourism-driven states like Nevada, tips are often the primary source of income for hospitality workers.
Key provisions of the bill clarify that the exemption applies only to direct customer tips and not to regular wages, bonuses, or service charges added to bills by employers. Employers would no longer need to withhold federal income tax from reported tips, which could reduce administrative burdens—especially for small businesses.
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