HR 482
No Tax on Tips Act
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Bill overview
The No Tax on Tips Act aims to eliminate federal income tax on qualified tips received by employees. It allows individuals to deduct up to $25,000 of their tips, subject to certain limitations such as income thresholds and reporting requirements. Additionally, the bill expands a tax credit for employers to include payroll taxes paid on tips received for beauty services like barbering, hair care, and spa treatments, effective after December 31, 2024.
Key provisions
- Allows individuals to deduct up to $25,000 of qualified tips.
- Defines ‘qualified tips’ as cash tips reported to the employer.
- Establishes an income threshold ($160,000 in 2025) above which the deduction is not allowed.
- Expands the business tax credit for employer payroll taxes paid on tips to include beauty service establishments.
- Specifically includes barbering and hair care, nail care, esthetics, and body and spa treatments as ‘beauty services’ for the tax credit.
- The Secretary of the Treasury will publish a list of occupations traditionally receiving tips.
- Non-itemizers can now claim the tip deduction.
- The tip deduction is not treated as a miscellaneous itemized deduction or considered in overall income limitations.
Who is affected
- Individual taxpayers
- Employees who customarily receive tips
- Employers, particularly in the food and beverage and beauty service industries
- The Internal Revenue Service (IRS)
- Taxpayers
Notable changes
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Primary sponsor
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119th CONGRESS — 1st Session
H. R. 482
IN THE HOUSE OF REPRESENTATIVES
A BILL
To amend the Internal Revenue Code of 1986 to eliminate the application of the income tax on qualified tips through a deduction allowed to all individual taxpayers, and for other purposes.
This Act may be cited as the No Tax on Tips Act
.
The deduction allowed by subsection (a) for any taxpayer for the taxable year shall not exceed $25,000.
For purposes of this section—
Not later than 90 days after the date of the enactment of this Act, the Secretary of the Treasury (or the Secretary's delegate) shall publish a list of occupations which traditionally and customarily received tips on or before December 31, 2023, for purposes of section 224(c)(1) of the Internal Revenue Code of 1986 (as added by paragraph (1)).
The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by redesignating the item relating to section 224 as relating to section 225 and by inserting after the item relating to section 223 the following new item:
Section 63(b) of the Internal Revenue Code of 1986 is amended by striking and
at the end of paragraph (3), by striking the period at the end of paragraph (4) and inserting and
, and by adding at the end the following new paragraph:
the deduction provided in section 224.
Section 67(b) of the Internal Revenue Code of 1986 is amended by striking and
at the end of paragraph (11), by striking the period at the end of paragraph (12) and inserting , and
, and by adding at the end the following new paragraph:
the deduction under section 224 (relating to qualified tips).
Section 68(c) of the Internal Revenue Code of 1986 is amended by striking and
at the end of paragraph (2), by striking the period at the end of paragraph (3) and inserting , and
, and by adding at the end the following new paragraph:
the deduction under section 224 (relating to qualified tips).
The Secretary of the Treasury (or the Secretary's delegate) shall modify the tables and procedures prescribed under section 3402(a) of the Internal Revenue Code of 1986 to take into account the deduction allowed under section 224 of such Code (as added by this Act).
Section 45B(b)(2) of the Internal Revenue Code of 1986 is amended to read as follows:
In applying paragraph (1) there shall be taken into account only tips received from customers or clients in connection with the following services:
The providing, delivering, or serving of food or beverages for consumption, if the tipping of employees delivering or serving food or beverages by customers is customary.
The providing of beauty services to a customer or client if the tipping of employees providing such services is customary.
Section 45B of such Code is amended by adding at the end the following new subsection:
For purposes of this section, the term beauty service means any of the following:
Barbering and hair care.
Nail care.
Esthetics.
Body and spa treatments.
Section 45B(b)(1)(B) of the Internal Revenue Code of 1986 is amended—
by striking as in effect on January 1, 2007, and
; and
by inserting , and in the case of food or beverage establishments, as in effect on January 1, 2007
after without regard to section 3(m) of such Act
.
The amendments made by this section shall apply to taxable years beginning after December 31, 2024.