WASHINGTON, D.C. — President Donald Trump on Thursday promoted his administration’s “No Tax on Tips” policy, saying millions of Americans have already used the tax break to reduce their federal income tax burden.
What This Means for You
- Eligible workers can deduct up to $25,000 in tip income from federal taxes
- The benefit applies only to federal income tax, not Social Security or Medicare taxes
- Lower-income workers may see limited impact if they do not owe federal income tax
Speaking in Las Vegas, Trump highlighted the policy’s early use, noting that more than 6 million filers have claimed the deduction, with an average reported deduction of about $7,100.
The policy, enacted July 4, 2025, as part of the “One Big Beautiful Bill” Act, allows workers in tip-based occupations to deduct a portion of their tipped income from taxable earnings through tax year 2028.
How the Policy Works
The deduction applies to workers in jobs that “customarily and regularly” receive tips, including restaurant staff, bartenders, and some service-sector roles.
A tax deduction reduces the amount of income subject to taxation, rather than directly lowering a taxpayer’s bill dollar-for-dollar.
Because of that structure, the benefit primarily applies to workers who earn enough to owe federal income tax. Workers whose income falls below the standard deduction threshold may not see a direct reduction in their tax liability.
The policy does not apply to payroll taxes, meaning tips are still subject to Social Security and Medicare taxes.
Reported Impact
According to administration figures, more than 53 million Americans have claimed at least one of several recent tax changes, including the tip deduction and a similar provision affecting overtime income.
Officials said more than 25 million filers have claimed a deduction on overtime earnings, averaging about $3,100.
Trump said the changes are increasing take-home pay for workers, while critics in Congress have opposed the broader tax package.
Reactions from Workers
During the event, several workers in Las Vegas described their experiences with the policy.
“I received the largest tax return in my life this year all because my tips weren’t being taxed any longer,” one resident said.
“It helps tremendously,” said a waitress, while another worker said the policy provided “a little more breathing room” for everyday expenses.
Next Steps
The deduction is currently authorized through tax year 2028. Future changes would require additional action by Congress.
For the latest news on everything happening in Chester County and the surrounding area, be sure to follow MyChesCo on Google News.