No Taxes On Tips 2025 No Taxes. If an employee’s tips are less than $20 in a single month, they are not taxed, and many tips—especially when they’re cash—go under the table. A “no taxes on tips” approach will not do the trick, and the distortions in the tax system outweigh the few benefits it might provide.

If we exempt all tips from taxation, then maybe the doctors and the lawyers are going to decide that they won’t charge hourly fees and just get paid in big, untaxed tips. Tpc figures exempting tips from income tax would reduce federal revenue by $6.5 billion in 2025, while capping the benefit to those making $75,000 or less would limit the.