What to know about the 'no tax on tips' policy

The new bill would make tip income exempt from federal income taxes

Waitress holding a jar full of coins that is labeled "Tips"
The tax break will apply to waiters, bartenders, delivery drivers and beauty service workers
(Image credit: Peter Gazeley / Getty Images)

Typically, the government wants a cut of any money you earn. But soon, tips earned on the job may become an exception to that rule.

Following promises from both parties during the last presidential election, the "no tax on tips" policy is now one step closer to becoming a reality after passing both the House and Senate. Should the bill become law, that would mean the end of federal income tax on tips — with some caveats.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE
https://cdn.mos.cms.futurecdn.net/flexiimages/jacafc5zvs1692883516.jpg

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up
Becca Stanek, The Week US

Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She previously served as a deputy editor and later a managing editor overseeing investing and savings content at LendingTree and as an editor at the financial startup SmartAsset, where she focused on retirement- and financial-adviser-related content. Before that, Becca was a staff writer at The Week, primarily contributing to Speed Reads.