We have received text from H.R. 482: No Tax on Tips Act. This bill was received on 2025-01-16, and currently has 6 cosponsors.
Here is a short summary of the bill:
This bill, titled the "No Tax on Tips Act," proposes changes to the Internal Revenue Code related to how tips are treated for tax purposes. Here are the main points of the legislation:
Deduction for Qualified Tips
The bill introduces a new tax deduction for tips received by employees in certain occupations:
- Deduction Details: Employees will be allowed to deduct cash tips they receive during the taxable year, specifically those reported to their employers. The maximum deduction amount is set at $25,000 per taxpayer per year.
- Definition of Qualified Tips: Qualified tips are defined as cash tips received by individuals in jobs that have historically received tips (like waitstaff or bartenders) up until December 31, 2023. The Secretary of the Treasury will publish a list of these occupations within 90 days after the bill becomes law.
- Limitations on Employees: The bill excludes individuals from claiming the deduction if they received more than a certain level of total compensation from their employer in the previous year.
Allowances for Non-Itemizers
The bill allows non-itemizing taxpayers to claim this deduction, meaning they don't have to itemize their tax deductions to benefit from the tip deduction.
Non-Application of Certain Limitations for Itemizers
- The deduction for qualified tips will not be categorized as a miscellaneous itemized deduction, allowing itemizers to take the full deduction without it impacting their overall limit.
- This provision is designed to give more taxpayers the ability to benefit from the deduction regardless of their overall itemized deduction amounts.
Withholding Adjustments
The Secretary of the Treasury is tasked with modifying tax tables and withholding procedures to reflect the new deduction for qualified tips.
Extension of Credit for Employer Social Security Taxes
This part of the bill expands an existing tax credit:
- Application to Beauty Services: The bill extends the existing credit for employers who pay social security taxes on tips to also include beauty service establishments (like salons and spas).
- Definition of Beauty Services: Beauty services will be defined to include barbering and hair care, nail care, esthetics, and spa treatments.
- Minimum Wage Consideration: The adjustment to the credit will consider the current minimum wage rates for food and beverage establishments, ensuring the credit is relevant to modern standards.
Effective Date
The provisions set forth in the bill will take effect for taxable years starting after December 31, 2024.
Relevant Companies
- Darden Restaurants (DRI) : This company could be affected as it operates restaurants where tipping is a standard practice, meaning employees could benefit from the deduction.
- Rush Street Interactive (RSI) : Involved in the hospitality industry, which includes services where tipping occurs, potentially making the deduction relevant for its employees.
- Planet Fitness (PLNT) : While primarily a gym, some services within this business may involve tips, particularly in personal training where gratuities might be customary.
This article is not financial advice. See Quiver Quantitative's disclaimers for more information.
