If you’ve got employees who earn tips — think restaurants, salons, bars, delivery — a big shift may be headed your way.
The Senate just passed the “No Tax on Tips Act,” a bill that would make up to $25,000 in annual tips exempt from federal income tax. It’s now on its way to the House, and there's strong support there too. If it becomes law, it could change the way you handle payroll, benefits, and employee compensation —fast.
Let’s break it down and talk about what this could mean for your business.
It’s Not Just a Win for Employees
On the surface, this bill sounds like a big boost for tipped workers. And it is. More take-home pay without more hours worked? That’s hard to argue with.
But employers — especially those in the hospitality, food service, or personal care industries — could see real upside too. The bill includes a potential expansion of payroll tax credits tied to tips, which means your business could owe less in taxes on the same amount of labor. Combine that with stronger retention and recruiting power in a tough hiring market, and this isn’t just good news for your team — it could be a financial win for you too.
Here’s Where It Gets Tricky: Payroll & Compliance
Like any tax-related change, this comes with a catch: you’ll need to be able to track and report tip income accurately, especially what’s taxable and what’s not.
That means:
If you’re still managing this manually (or barely managing it at all), now’s the time to tighten things up. At Segura Gallo HR & Consulting, we help business owners streamline payroll operations — including tip tracking and compliance. If this bill becomes law, we’re ready to help our clients pivot without the panic.
There’s Still Debate
Supporters say this move would bring more fairness to tipped workers and boost the economy. Critics warn it might lead to lower base wages and could complicate eligibility for tax credits and government benefits.
Like most policy changes, it’s not all black and white. What matters is knowing how it could affect your business — and being prepared to adjust your systems accordingly.
Bottom Line: Be Proactive, Not Reactive
This bill hasn’t passed yet, but it’s gaining momentum. If you employ tipped workers, this is one of those moments where being ready early is a lot better than scrambling later.
Our advice? Stay alert, stay informed, and if you’re not sure whether your payroll system is ready for changes like this — let’s have a conversation.
