Here's what you need to know:

Proposed Legislation: Both the Senate and the House have advanced bills related to "no tax on tips." The Senate unanimously passed the "No Tax on Tips Act" on May 20, 2025. The House narrowly passed a larger tax cuts package, often referred to as "The One, Big, Beautiful Bill," on May 22, 2025, which also includes a "no tax on tips" provision. What it would do (if passed and signed into law): It would create a new federal income tax deduction for tips. This deduction would apply to people working in jobs that have traditionally received tips (the Treasury Department would publish a list of qualifying occupations). Only tips reported to the employer and noted on a worker's W-2 would qualify. There would be an income limit for eligibility, typically around $160,000 for 2025, which would be adjusted for inflation. The proposed deduction amount in some versions is up to $25,000 annually. The proposed deduction is generally set to expire after four years. What it would NOT do: It would not eliminate payroll taxes (Social Security and Medicare) on tips. These would still be collected. It would not eliminate state or local taxes on tips. Some states are considering their own tip tax exemptions, but this federal proposal doesn't affect them. It may not benefit all tipped workers, as some already earn too little to owe federal income tax.

House GOP Tax Plan ("The One, Big, Beautiful Bill"): This larger tax package, which passed the House on May 22, 2025, also includes a significant, temporary boost to the standard deduction for Americans 65 and older. It proposes an extra $4,000 for older adults who take the standard deduction (or $8,000 for a married couple both over 65), in effect through 2028. This bonus deduction would be subject to income limits (e.g., AGI no more than $75,000 for single filers / $150,000 for married filing jointly). These proposals aim to reduce the tax burden on seniors, with some directly targeting the taxation of Social Security benefits.