Deduction for tips
Up to $25,000 of qualified tip income is deductible.
JCT line: "Deduction for tips". Rises to $7.6B by FY2028 then falls to $1.9B in FY2029, consistent with expiry after 2028.
Confined to occupations where tipping is customary, and within them worth most to the highest-earning tipped workers. Because it is a deduction rather than a credit, it is worth nothing to tipped workers whose income falls below the standard deduction, a large share of the group it names.
Structural reading
The smallest of the three new provisions and the clearest illustration of why the form of a benefit matters as much as its target. Delivered as a deduction rather than a credit, it is worth most to the highest-earning tipped workers and nothing at all to those earning below the standard deduction, the opposite of the distribution its framing implies. It also creates a durable line between two workers earning the same amount in different occupations, which is a distinction the tax code does not otherwise draw for wage income. Whether the resulting constituency is strong enough to convert a 2028 expiry into permanence is the question worth watching, and §199A is the precedent.
Who gets it
The channels the benefit actually flows through, described by asset position, entity form and form of return. Never by named individuals.
Cost split by the concentration score. That score is a judgement rather than a published figure, so treat this as the scale of the split, not an audited allocation.
- Higher-earning workers in tipped occupations
The deduction is capped at $25,000 but scales up to that cap, so it delivers most of its value to those already receiving the largest tip income rather than the least.
- Employers in tipping industries
Making tip income more valuable after tax reduces pressure on tipped base wages, shifting part of the benefit from the worker to the employer.
- Structural exclusion of low-earning tipped workers
A deduction has no value to someone whose income is already below the standard deduction, which describes a substantial share of tipped workers.
Who pays
General taxpayers, including workers earning identical amounts in untipped occupations.
This transfer follows a general pattern, asymmetric organisation, sustained expert attention, and scheduled expiry dates.
How rent-seeking works →Legislative history and accountability
Enacting statutes, major amendments, recorded votes with party breakdown, and live reform proposals.
Enabling legislation
- One Big Beautiful Bill ActP.L. 119-21Jul 4, 2025
Created a deduction of up to $25,000 for qualified tips reported on statements furnished to the individual, covering employees receiving a W-2 as well as independent contractors and self-employed individuals. Enacted through budget reconciliation.
Party-line (Republican)Enacted through budget reconciliation, the procedure that allows passage without minority-party votes. No separate roll call on this provision is recorded here.
Sources and data freshness
Published within the last year. Figures marked unverified are seed estimates that have not been reconciled line-by-line against the primary source document. See the methodology for how each score is constructed.