The "no tax on tips" provision within the Senate version of the One Big Beautiful Bill Act allows tipped workers to deduct tip income from their federal taxable income, up to $25,000 annually. The deduction phases out for individuals earning more than $150,000 and couples earning over $300,000.

Congress passed the tax cut and spending megabill with President Trump's legislative priorities which includes new tax exemptions for tipped hourly workers. But how will it work?