Now, former President Donald Trump has added his own twist on this in his proposed “big beautiful bill.” It provides a tax deduction for tips, and this has sparked concern among workers in service sectors. The “no tax on tips” provision allows tipped workers to claim a deduction of up to $25,000. This advantage still holds true even for taxpayers who do not itemize their deductions. Through this multiyear initiative, the program seeks to reduce workers’ taxable income who rely on tips. Yet, its long even temporary nature and potential limitations have raised doubts about how beneficial it may really be.
With the tax break available starting in 2025 through 2028, service workers now have a window of opportunity to get on board. The deduction starts to phase out when a person’s modified adjusted gross income is more than $150,000. This stipulation has worried some workers, leaving them unsure if they will actually reap the rewards of the new law.
Maddy Lopez, a bartender who worked in the service industry for three decades, said she had the same reservations. She explained that although this provision sounds good on the surface, it will not be as helpful as expected.
“It’s a little too good to be true.” – Maddy Lopez
Lopez’s deep knowledge of the industry has led her to understand that tax breaks usually have caveats or complicated restrictions built in. For one, the new provision, she said, eases obligations on the industry. Workers may encounter lucrative promises, but later find out it doesn’t pay off as advertised.
T. Cooper, an NYC-based hair and makeup artist, agreed. In her experience, she said, prices in the hair industry tend to go up annually. This jump in price is being fueled by the rising cost of materials and services. Cooper added that lawmakers must better educate themselves on the tax implications that go along with tipping.
“A lot of people don’t understand that you will still have to pay the tax on tips.” – T. Cooper
Employees that receive more than $20 in tips per month are required to report those earnings to their employer. IRS regulations require this to be a stated requirement. It’s no wonder that the agency’s interpretation of how to report tip income is confusing for so many. This confusion only seems to compound the uncertainty around the new tax provision.
Cooper pointed to the larger problem of increasing cost of service, noting,
“The service overall has just become way more expensive.” – T. Cooper
This sentiment is a mirror to an increasingly popular trend among Americans. A recent Bankrate report shows that almost 41% of respondents think “tipping has gotten out of hand” in 2025. That’s a big jump from only 25% last year. This heightened scrutiny over problematic tipping practices would only add an air of controversy around acceptance of the new tax break.
So it’s no surprise that both the GOP and Democratic sides of the 2024 presidential campaign have proposed making more or all tips tax-free. Though the public’s support may be applauded by proponents of the proposal, doubts still linger over its sustainability and effects on the nation’s service workers. Many industry professionals are left questioning whether this tax break will make a meaningful difference in their financial situations or if it is just another political promise.
As Lopez noted, the realities of what it’s like to work in a tipping culture are often much more complex. For many service workers, earning tips can mean variable income, which may not always reflect their hard work and dedication.
“You’re only making $20 on the same guest.” – Maddy Lopez