The No Tax on Tips Bill: What it Means for the Beauty Industry
No Tax on Tips Bill: On May 20, 2025, the Senate unexpectedly passed the No Tax on Tips Bill in a unanimous vote (100-0), occurring in a surprisingly non-partisan fashion and giving unexpected strength to its chances of success in becoming law. Then, the House successfully passed the full Reconciliation Act, including the No Tax on Tips Bill. The bill now will take its course back through the Senate (and back to the House again if there are any changes). While there are still some hurdles to finalization, the odds of successful completion have increased substantially. We’ll keep you updated here as things develop and let you know what this means for you, your business, and your industry.
The Bill
Bill S. 129, or the No Tax on Tips Bill, creates a federal income tax deduction of up to $25,000 a year for certain types of tips for eligible employees.
- Bill S. 129, or the No Tax on Tips Act, creates a federal income tax deduction of up to $25,000 per year for certain types of cash tips for eligible employees.
- “Cash tips” in the bill is defined to include cash as well as credit, debit and other digital tipping methods.
- The bill was brought up Tuesday for “unanimous consent”—a type of vote usually reserved for routine congressional matters.
- Democrats and Republicans praised the speedy passage of the bill and framed it as an example of successful bipartisanship. The legislation, as part of the broader bill, passed the House today.
- A link to the formal Congressional Bill and summary is provided, here.
The Facts
This bill establishes a new tax deduction of up to $25,000 for tips, subject to limitations. The bill also expands the business tax credit for the portion of payroll taxes an employer pays on certain tips to include payroll taxes paid on tips received in connection with certain beauty services. As it’s currently structured, the bill is retroactive to January 1st of 2025.
Under the bill, the new tax deduction for tips is limited to tips:
- Received by an employee during the course of employment in an occupation that customarily receives tips.
- Reported by the employee to the employer for purposes of withholding payroll taxes.
Note: An employee with compensation exceeding a specified threshold ($160,000 in 2025 and adjusted annually for inflation) in the prior tax year may not claim the new tax deduction for tips.
Finally, the bill expands the business tax credit for the portion of payroll taxes that an employer pays on certain tips to include payroll taxes paid on tips received in connection with barbering and hair care, nail care, esthetics, and body & spa treatments. Under current law, an employer is allowed a business tax credit for the amount of payroll taxes paid on certain tips received by an employee in connection with providing, delivering, or serving food or beverages.
The Next Steps
We will continue to keep you well informed of the bill’s progress and couldn’t be more excited for you about its progress to date. This also puts you in a unique position when it comes to processing through MeevoPay and utilizing MeevoTips.
If you’re currently a MeevoTips user: There’s nothing else to do at this point. Congratulations—you are all set up for success!
If you don’t have MeevoTips yet: Click here to start earning higher tips, avoid processing fees, receive instant payouts, and access the reporting you need to make the most of this new opportunity.
