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Donald Trump’s June 9, 2024, Las Vegas pledge to stop taxing tips did not immediately change tax law. Congress later enacted a narrower measure: a temporary federal income-tax deduction for qualifying tips, subject to eligibility rules, an annual cap and income limits. It does not make every tip tax-free or eliminate Social Security and Medicare taxes on tips.
What Trump said at the Las Vegas rally
At a campaign rally in Las Vegas on June 9, 2024, Trump promised to pursue a policy for tipped workers. The Associated Press reported his words as: “So this is the first time I’ve said this, and for those hotel workers and people that get tips you’re going to be very happy because when I get to office, we are going to not charge taxes on tips people (are) making,” (Associated Press report republished by Yahoo News, June 10, 2024).
The statement was a campaign pledge, not a tax change. Contemporary reporting noted that his prepared remarks called for legislation; the rally speech itself did not alter what workers owed.
What “no tax on tips” means under current law
Public Law 119-21, signed on July 4, 2025, created a deduction for qualified tips for tax years 2025 through 2028. The IRS uses the shorthand “No Tax on Tips,” but the provision is a deduction from taxable income—not a tax credit, cash payment or blanket exemption. Its value depends on a taxpayer’s circumstances and applicable rules. See the IRS fact sheet on the Working Families Tax Cuts.
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- Annual limit: The deduction is capped at $25,000. This is the maximum deduction, not a payment of $25,000 or a guaranteed amount of tax savings.
- Income phaseout: The deduction phases out when modified adjusted gross income exceeds $150,000 for most filers or $300,000 for joint filers.
- Duration: The provision applies to tax years 2025 through 2028.
- Tax type: It is a federal income-tax deduction. It does not eliminate payroll taxes, including Social Security and Medicare taxes, on tips.
The IRS’s 2026 filing-season guidance confirms the cap and phaseout. These figures and the applicable requirements should be checked against IRS instructions for the specific return year.
Which tips and workers may qualify
Not every payment described as a tip qualifies. IRS guidance generally covers voluntary cash or charged tips from customers, including tips received through tip sharing. A mandatory service charge is not a qualified tip.
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Eligibility also depends on the worker’s occupation and how tips are reported. The occupation must be one that customarily and regularly received tips on or before December 31, 2024, and IRS rules require specified reporting information or, in some cases, Form 4137. Self-employed workers face an additional limit tied to net income from the trade or business in which they earned the tips. The IRS explains these conditions in its practical guidance for taxpayers and 2025 tax-law guidance.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How eligible workers claim the deduction
For tax year 2025, eligible taxpayers claim the deduction on Schedule 1-A with their federal income-tax return. It is available whether they itemize or take the standard deduction. Married taxpayers must file jointly to claim it.
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- Check the current IRS instructions for Schedule 1-A and confirm that your occupation, tips, income and filing status meet the rules.
- Gather the required tip and income records and reporting statements. Follow the current instructions if Form 4137 or other reporting is relevant to your situation.
- Complete Schedule 1-A and include it with your federal return. The IRS provides a Schedule 1-A filing announcement and a Schedule 1-A explainer.
Because occupation definitions and reporting details matter, do not assume that receiving tips alone makes you eligible. Use the instructions for the return year you are filing.
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