‘No tax on tips’: What does it mean for Pennsylvania’s tipped workers?

Eligible tipped workers would receive an average annual tax cut of $1,700. But according to the Economic Policy Institute the benefits would heavily skew toward higher-income tipped workers.

Tipped workers throughout Pennsylvania have a burning question about tax changes in President Donald Trump’s “One Big Beautiful Bill”: Will it allow them to keep more of their hard-earned money?

The “no tax on tips” provision in the bill allows tipped workers to deduct up to $25,000 in reported tips and $12,500 in overtime pay from their taxable income on their federal tax returns. 

But not all deductions are created equal. 

Eligible tipped workers would receive an average annual tax cut of $1,700. But according to the Economic Policy Institute, a nonpartisan think tank, the benefits would heavily skew toward higher-income tipped workers. From the EPI:

“Among all tipped workers, the top 20% would receive an average tax cut of $5,768 while those in the bottom 20% would only get $74 on average. The average for the bottom quintile is small in large part because two-thirds of those workers have incomes so low that they do not pay federal income taxes and thus will not see any tax benefit.”

And, as the EPI points out, the public would be footing the bill for those benefits, through cuts to social programs, such as Medicaid and food stamps that benefit millions of people—including tipped workers. Those cuts would offset lost revenue from no tax on tips and large tax cuts for the rich. 

Tipped workers will begin to see if “no tax on tips” really benefits them in 2026, when they file their 2025 tax returns.

The tax exemption on tips ends Dec., 31 2028.

The law is limited to individuals in an occupation that “customarily and regularly” receive tips, including:

• Baggage porters and bellhops
• Barbers and hair stylists
• Bartenders
• Food servers
• Gambling dealers
• Maids and housekeeping cleaners
• Nannies and babysitters
• Personal care and service workers
• Private event planners
• Private event and portrait photographers
• Private event videographers
• Pet caretakers
• Tattoo artists
• Tutors

Click here to see the US Treasury Department’s list of all the tipped jobs that qualify for the exemption.