The federal government has introduced a new provision under the reconciliation bill. It is popularly dubbed the “No Tax on Tips” policy. This policy was signed by President Donald Trump in July 2025. This measure allows eligible workers to deduct up to $25,000 annually from their taxable income if the earnings come from regularly received tips.
Which Jobs Qualify for Tip Tax Exemption
According to the U.S. Treasury Department’s preliminary list published in the Federal Register, the following roles are eligible:
Hospitality Sector
- Bartenders
- Wait staff
- Non-restaurant food servers
- Dishwashers
Hotel Industry
- Desk clerks
- Concierges
- Housekeeping staff
Casino Roles
- Dealers
- Cashiers
- Cage workers
- Sportsbook writers and runners
These roles are considered “tip-intensive,” meaning workers regularly receive gratuities as part of their compensation.
Political Context and Timeline
The “No Tax on Tips” provision was a key campaign promise during the 2024 presidential race. Especially in Nevada, a state with a large hospitality workforce. Both Trump and then-Vice President Kamala Harris addressed the issue publicly. It was signaling bipartisan interest in reforming how tips are taxed.
The policy is set to expire at the end of 2028 unless extended by future legislation.
IRS Guidelines and Limitations
The Treasury Department expects the final list of qualifying jobs to remain largely unchanged. Some roles are explicitly excluded:
- Health professionals
- Performing artists
- Athletes
The IRS will release further guidance to clarify edge cases and enforcement mechanisms. Importantly, tips must be “regularly received”. It should also be documented to qualify for the deduction.
Economic Impact on Workers and Employers
Ted Pappageorge, secretary-treasurer of the Culinary Union, emphasized that this policy could “take a big bite out of your tax bill” and inject fairness into the tax code. For workers in cities like Las Vegas, where tip income often exceeds base wages, this could mean thousands in annual savings.
Employers may also benefit indirectly, as reduced tax burdens could improve job satisfaction and retention in high-turnover roles.
What Happens After 2028
Unless Congress renews the provision, the tip exemption will sunset in December 2028. Political analysts suggest that its renewal may hinge on economic performance and lobbying from hospitality unions.
Conclusion and Next Steps
The “No Tax on Tips” policy marks a significant shift in federal tax treatment for service workers. While still in its early stages, the provision has already sparked debate across political and economic circles. Workers should monitor IRS updates and consult tax professionals to ensure compliance and maximize benefits.
