What “No Tax on Tips” Means for You! 🤔

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA), which includes the No Tax on Tips Act.

Here’s how it works in plain terms:

•Employees in occupations where tipping is customary (think home service techs, delivery drivers, cleaners, stylists) can deduct up to $25,000 of reported tip income from federal income tax, starting with 2025 wages reported on your Form W-2.

•That means federal income tax is not owed on that portion, but Social Security, Medicare, and state/local taxes still apply.

•The deduction phases out for individuals earning over $150K ($300K joint) in modified Adjusted Gross Income.

•It’s a deduction, not an exclusion. Tips must still be withheld and reported via payroll, but at tax time the employee gets credit on their return to reduce taxable income.

Employers also get a win. The bill expands the employer payroll tax credit on tipped income (previously just for restaurants) to cover beauty and service businesses, including home service companies too.

The provision is temporary, valid only through tax year 2028, so it’s time-sensitive.

That is why at Copilot CRM we just rolled out a one‑tap tipping feature on invoices.

We expect a massive increase in tips received.

👉 What to do next:

1. Update payroll codes now to separate “tip wages.”

2. Enable tipping in Copilot settings so it’s automatic.

3. Inform your crew that they can deduct up to $25K of tip income on their federal return, and you claim the expanded FICA credit.

No extra tax for you. Less tax for them. Win all around.

-Mike