Tips that are automatically added to a customer's bill — like the mandatory gratuity on a large party at a restaurant — would count as "voluntary" tips for purposes of the new federal tax deduction on tips. Without this fix, servers and other tipped workers whose tips come through auto-gratuities or suggested-tip prompts might not qualify for the deduction, even though the money functions the same way as a cash tip. The bill closes that loophole so all tipped workers benefit equally.
Congressional Summary
This bill expands the federal tax deduction for qualified tip income to include tips that are automatically added to a customer's bill and tips that are suggested tips prompted by a business by treating such tips as voluntarily paid. As background, for 2025 through 2028, individuals may claim a tax deduction of up to $25,000 per year for qualified tips received in occupations that customarily and regularly receive tips. However, one of the conditions for claiming the tax credit is that the tips must be voluntary, determined by the customer, and nonnegotiable.
Details
- Congress
- 119th
- Chamber
- Senate
- Status
- summarized
- Action
- Introduced in Senate
- Action Date
- 2025-09-11
- Date Added
- 2026-04-16
- Source
- Congress.gov →
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