The U.S. Senate passed the "No Tax on Tips Act" on May 20, a bill introduced by Sen. Ted Cruz of Texas that would create a tax deduction on tips worth up to $25,000.

The bill , which passed with unanimous consent , is not yet law. It still needs to be passed by the U.S. House of Representatives and then sent to the president for approval.

President Donald Trump promised to end taxes on tips during his most recent presidential run. It's an idea that both Republicans and Democrats have embraced .

What would the No Tax on Tips Act do?

The bill would establish a new federal income tax deduction for cash tips up to a maximum amount of $25,000 per tax year, according to the legislation.

Cash tips include credit and debit card tips, according to the Internal Revenue Service .

The new deduction would be able to be claimed by taxpayers who earn up to $160,000, a figure that would rise with inflation, USA TODAY reported .

A tax deduction reduces the portion of a person's income that is taxable, according to the Tax Foundation . That means the bill could lower the amount of federal taxes a person owes.

What type of workers qualify under the No Tax on Tips Act?

The tax deduction would be available for workers in occupations that "traditionally and customarily" receive tips, according to the bill.

An estimated 4 million people worked in tipped occupations in the United States in 2023, reflecting about 2.5% of all employment, according to a Budget Lab at Yale article about a version of the "No Tax on Tips Act" in 2024. These include waiters and waitresses, bartenders, barbers and hairdressers.

The text of the most recent " No Tax on Tips Act " states that a list of traditionally tipped occupations would be published soon after the bill becomes law.

The Budget Lab at Yale concluded that the version of the bill it analyzed wouldn't have that big of an impact on the workforce since many tipped workers are low-income earners, and a significant share don't pay any federal income tax because of how little they make. In 2022, about 37% of tipped workers faced no federal income tax.

The article noted that even if tipped workers don't have any federal income tax liability, they still pay federal payroll taxes such as Federal Insurance Contributions Act taxes, or FICA, which, according to the IRS , are also known as Social Security taxes.

How many tipped workers are in Washington?

While exact figures are difficult to determine, the number of workers in tipped jobs in Washington state is relatively low. An analysis shared by the Tax Policy Center found that well under 5% of workers in Washington have tipped jobs.

There were about 43,450 waiters and waitresses in Washington in 2023, according to the U.S. Bureau of Labor Statistics . However, this is just one category of tipped occupations and doesn't reflect the entire population of people who work in jobs that typically receive tips.

What is the minimum wage for tipped workers in Washington?

Washington is a state that requires employers to pay the full state minimum wage before tips, according to the U.S. Department of Labor .

As of Jan. 1, the state minimum wage in Washington is $16.66 per hour.

Some localities have higher minimum wages than the state rate, according to MinimumWage.com . The minimum wage in Seattle is $20.76, regardless of whether the job is tipped or not, the city stated in a news release .

How much would the No Tax on Tips Act cost?

Ending taxes on tips would cost around $110 billion in federal revenues over the next 10 years, according to estimates by the center-right Peter G. Peterson Foundation.