How Trump's "big, beautiful bill" stops short of "no tax on tips" promise

The fine print in President Trump's recently signed "big, beautiful bill" could restrict savings for some tipped workers.Why it matters: Trump made "no taxes on tips" a centerpiece of his presidential campaign — and while a provision in the new law honors that idea on the surface, it doesn't eliminate all taxes.Here's what to know:How does the "big, beautiful bill" impact tipped workers?State of play: A qualifying worker's first $25,000 in tips are exempt from income taxes.Tipped workers will still pay 7.65% in payroll taxes that fund Social Security and Medicare.The law shouts out food service and cosmetics industry workers specifically, stressing that the tax exemption will apply "only to certain lines of business."By the numbers: The tax deduction would decrease once a worker's income hits $150,000 — decreasing further at $300,000.Tipped workers filing a joint return with spouses would also see less of a deduction.The law also requires workers to provide their Social Security numbers — as well as any spouses — making undocumented workers ineligible for the tax break. Undocumented immigrants paid $96.7 billion in federal, state, and local taxes in 2022, per the Institute on Taxation and Economic Policy (ITEP).When does the tax provision go into effect?The law will apply to the current tax year, including tips already accrued.How many tipped workers are there?About four million people in the U.S. earned tips in 2023, according to Yale University's Budget Lab. That's 2.5% of all workers.Two-thirds of restaurant workers who work for tips earn so little that they don't pay federal income taxes, per a 2024 report parsing data from the Census Bureau's American Community Survey.Workers are currently taxed on tips, which puts an added financial strain on a demographic that tends to be lower income. The median weekly wage for tipped occupations in 2023 was $538, versus $1,000 for non-tipped workers, per the Budget Lab.What did Trump promise tipped workers on the campaign trail?"No tax on tips" began as a promise Trump made during a 2024 campaign stop in Nevada.It has since become a top talking point for Republicans as they've promoted their megabill.The intrigue: "No tax on tips" has emerged as a rare bipartisan, populist policy.Former Vice President Kamala Harris adopted the promise as a part of her own presidential campaign two months after Trump did.In May, the Senate passed a separate "No Tax on Tips Act" in a surprise move, which no lawmakers — Republican or Democrat — objected to.Will no taxes on tips help tipped workers?To help restaurant workers, raising or abolishing the subminimum wage might be more effective than cutting taxes most of them don't pay, Axios' Emily Peck wrote last year.Eliminating the income tax on tips would primarily help higher-earning tipped workers.

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