Senate Unites on $25,000 Tax Break for Tipped Workers in Service Industry Boost

In a rare display of unity, the U.S. Senate has greenlit a bill granting a $25,000 tax deduction for tipped workers, a move that could lighten the load for millions in service industries. This legislation, championed by Sen. Ted Cruz, also extends business tax credits for payroll taxes on tips in beauty and spa services, offering a lifeline to salons and barbershops.

The catch? If you earned over $160,000 last year, don’t expect to cash in on this deduction. It’s designed for those hustling in customarily tipped roles—think waiters, bartenders, hairdressers, and nail techs. The bill targets cash tips reported to employers, building on the current rule where only tips above $20 a month must be reported.

With an estimated 4 million tipped workers in 2023, per Yale’s Budget Lab, this could be a game-changer for younger workers—many of whom are under 25, with 13% being teenagers. But the price tag is steep: the Peter G. Peterson Foundation estimates a $110 billion hit to federal revenues over a decade.

Sen. Jacky Rosen, D-Nevada, highlighted the bill as a nod to one of President Donald Trump’s campaign promises, emphasizing bipartisan support: “A good idea is a good idea, no matter who’s behind it.” As the bill heads to the House, it’s a key piece of a broader Republican push for a massive tax cut and spending package.