💸 No Tax on Tips: Big Relief Coming for Waiters, Bartenders & Service Workers

🧾 New US Tax Policy: Tips May Soon Be Tax-Free!

Good news for millions of service workers in the U.S. – tips may soon be fully tax-exempt under a new federal bill that has passed both the House and Senate. If signed into law, tip income will no longer be taxed, potentially boosting take-home pay for eligible employees in restaurants, salons, and delivery services.

✅ What Is the 'No Tax on Tips' Policy?

This policy will exempt up to $25,000 (approx ₹20 lakh) in tip income per year from federal income tax.

📌 Key Highlights:

• Applies to cash, credit, and digital tips

• Deducted “above the line” on tax returns — lowering total taxable income

• Still requires tips to be reported properly to employers and on W-2 forms

  
  

👩‍🍳 Who Qualifies for This Tax Break?

The bill targets traditional tipped workers, including:

• ✅ Waiters & Waitresses

• ✅ Bartenders

• ✅ Delivery Drivers

• ✅ Beauty Service Professionals (salon/spa workers)
  

To qualify, workers must:

• Have earned tips on or before Dec 31, 2023

• Earn less than $160,000 in 2025

• Possess a valid Social Security Number (and their spouse too, if married)

• Ensure tips are reported to their employer
  

A full list of eligible job categories will be issued 90 days after the bill’s passage.

⚠️ Who Doesn’t Benefit?

Critics point out some concerns:

• Low-income workers who already don’t pay income tax may not benefit

• Back-of-house workers (cooks, dishwashers) aren’t eligible

• Could discourage employers from raising base pay

• Might affect eligibility for benefits like Earned Income Tax Credit or Child Tax Credit
  

📅 When Will This Take Effect?

If the bill becomes law, the “No Tax on Tips” policy will apply starting tax year 2025 (i.e., for income earned after December 31, 2024).

🧠 Why This Matters

This could be a huge financial relief for India-based professionals working in the U.S. service sector or those planning to move. It also reflects a shift in tax policy towards incentivizing tipped work in an economy where service jobs are booming.