New law exempts up to $25,000 in tips from federal taxes, delivering on Trump’s campaign pledge Unclear rules leave workers and employers guessing whi

Note: Now that the No Tax on Tips measure has been signed into law, the new tax deduction for cash tips takes effect for the 2025 tax year. That means eligible workers could claim the deduction when they file their taxes in early 2026 for income earned in 2025. Despite the excitement over this change, there are some things the OBBBA doesn’t cover.

Congress passed the tax cut and spending megabill with President Trump's legislative priorities which includes new tax exemptions for tipped hourly workers. But how will it work?