Overview

• Senate Republicans narrowly approved the multi-trillion-dollar package on July 1 with Vice President JD Vance casting the tie-breaking vote to include the tip deduction.
• The measure creates an above-the-line deduction for reported tips up to $25,000, phases out for earners above $150,000 individually or $300,000 jointly and expires after 2028.
• Analyses project that about 60% of the roughly 4 million tipped workers would see an average $1,800 annual tax cut, with the top earnings quintile benefiting far more than the lowest.
• The National Restaurant Association and lawmakers from both parties back the exemption, citing advantages for over two million servers and bartenders.
• Advocates caution that simultaneous reductions to Medicaid and SNAP in the broader bill could undermine gains for low-income service workers who rely on those programs.