Ted Cruz, the U.S. senator for Texas, has announced his sponsorship of a bill aimed at establishing a new tax deduction for tips and expanding a payroll tax credit to include certain beauty services. This announcement was made on the official U.S. Congress website.
According to Fox Business, the proposed legislation, titled the "No Tax on Tips Act," seeks to provide financial relief to employees in traditionally tipped occupations by allowing a tax deduction for reported cash tips. The measure aims to alleviate the tax burden on service industry workers who rely heavily on tips as a significant portion of their income. Additionally, by expanding the existing payroll tax credit to include beauty services, the bill addresses the evolving landscape of tipped professions.
Under current Internal Revenue Service (IRS) regulations, employees who receive $20 or more in cash tips in a calendar month are required to report the total amount to their employer by the 10th day of the following month. These reported tips are subject to federal income, Social Security, and Medicare taxes. The new bill proposes a tax deduction of up to $25,000 for such reported cash tips, provided the employee's total compensation does not exceed $160,000 in the prior tax year.
According to Cruz's website, he said it "fulfills President Trump’s promise to end the wrongful practice of taxing voluntary tips," adding that the GOP should be "the party of bartenders, of waiters and waitresses." Nevada Sen. Jacky Rosen said that the bill would "ensure tipped workers in Nevada can keep more of their hard-earned money," while Sen. Daines mentioned that "by making tips tax-free, we’re delivering on President Trump’s promise to lower taxes and bring back American prosperity." Industry groups like the National Restaurant Association and the Professional Beauty Association also praised the effort, noting its potential to boost recruitment and support Main Street businesses.
