H.R. 482 — No Tax on Tips Act

This section establishes an above-the-line deduction of up to $25,000 for qualified tips reported to employers under section 6053(a) in taxable years beginning after December 31, 2024. Qualified tips are cash tips received in occupations that traditionally and customarily received tips as of December 31, 2023 (as listed by the Secretary of the Treasury within 90 days of enactment), excluding any amounts received by individuals with prior-year compensation from the employer exceeding the highly compensated employee threshold under section 414(q)(1)(B)(i). The deduction is available to both itemizers (exempt from miscellaneous itemized deduction rules under section 67(b) and the overall itemized deduction limitation under section 68(c)) and non-itemizers (added to section 63(b)); the Secretary must modify withholding tables under section 3402(a) to account for the deduction.

This section extends the employer credit for Social Security taxes on employee cash tips (i.e., Section 45B credit)—previously limited to food and beverage establishments—to beauty service establishments providing specified services (barbering and hair care, nail care, esthetics, or body and spa treatments) where customer tipping is customary. (As background, the credit equals the employer's 6.2% share of such taxes on tips exceeding the federal minimum wage threshold.) It further modifies the wage threshold calculation to the rate in effect at the time of the tips generally (previously, the rate as of January 1, 2007, for all covered establishments) while retaining the 2007 rate for food and beverage establishments. The changes apply to taxable years beginning after December 31, 2024.