The U.S. Senate has passed a new bill that would offer a tax deduction on tips worth up to $25,000.<\/p>\n
This bill, if enacted into law, would also extend to business tax credits for payroll taxes on tips in beauty and spa services.<\/p>\n
Sen. Ted Cruz, a Texas Republican, is pushing the proposal \u2013 which passed unanimously \u2013 an outcome considered rare for substantive legislation.<\/p>\n<\/p>\n
There are stipulations in the new bill: an employee with compensation exceeding $160,000 in the prior tax year would not be eligible to claim the new tax deduction for tips.<\/p>\n
The bill is limited to cash tips received by occupations that are customarily tipped. <\/p>\n
‘Tipped occupations’ are jobs where tips are common in the U.S., such as waiters, waitresses and professionals providing beauty services like barbering, hair care, nail care, esthetics, body and spa treatments.<\/p>\n<\/p>\n
The Budget Lab at Yale say they estimate there will be approximately 4 million workers in tipped occupations in 2023. <\/p>\n
They must also be reported by the employee to the employer for withholding payroll taxes. Under the current law, only tips exceeding $20 per month are required to be reported.<\/p>\n
According to the report by Budget Lab, a non-tipped worker in 2023 was a minimum of approximately 10 years older than the typical tipped worker. They also say one-third of the number of tipped workers were below 25, with 13% being teenagers.<\/p>\n
This new bill, if passed, would cost $110 billion in federal revenues over 10 years, according to estimates by the center-right Peter G. Peterson Foundation.<\/p>\n
Sen. Jacky Rosen, D-Nevada, pointed out during her floor speech that this bill was one of President Donald Trump’s key campaign promises.<\/p>\n
‘I am not afraid to embrace a good idea, wherever it comes from. So I agreed we need to get this done,’ she said.<\/p>\n
The passing of this bill through the Senate occurs as congressional Republicans attempt to seek advancement of a massive tax cut and spending package that will create a tax break on tips for the next four years.<\/p>\n
The next step is the House of Representatives before it becomes law.<\/p>\n<\/p>\n
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