What you should know about ‘no taxes on tips’ tax relief for your tipped employees
On July 4, 2025, President Donald Trump signed into law the One Big Beautiful Bill Act. One of its provisions has been dubbed “no taxes on tips” and provides a tax deduction of up to $25,000 for tips received by employees. The provision is retroactive to January 1, 2025, so certain payroll and reporting changes must be made for the current tax year.
Understanding the basics
The bill establishes a new tax deduction for tips, subject to some limitations:
· The tips must be received in an occupation that customarily receives tips, such as a service or hospitality occupation. The Treasury Department is required to publish a list of qualifying occupations by October 2025. Note that certain professionals are explicitly excluded, including those in the fields of law, accounting, health care, and consulting, among others.