How does “No Tax on Tips” work?

July 2, 2025: The Senate passed President Trump's tax agenda, included a provision to lower federal income taxes on worker tips enabling millions of employed tipped workers, including servers, bartenders, valets, and hairdressers, to deduct tip income from their taxable wages, up to $25,000 for earners making under $150,000. 

Eligibility.

This deduction is available for both employees (who receive a W-2) and independent contractors (who receive a 1099-NEC or 1099-K), as long as the tips are properly reported to your employer. Social Security, Medicare, and state/local taxes would still apply.

Reporting and documentation.

Tips must be reported on the appropriate tax forms:

• Form W-2 for employees

• Form 1099-NEC or 1099-K for independent contractors

• Form 4137 for self-reported tips

Why is KeepTips better than Venmo and PayPal?

Workers and customers do not need to download another app.  Customers simply scan your personal QR code and pay with their phone.

Who can use KeepTips?

Any employed service worker—valets, salon staff, barbers, drivers, housekeepers, and more.

Is Keep Tips legal?
Yes! KeepTips complies with all payment and tax laws. Stripe handles secure payments and reporting.

Can independent workers use the service?

Yes, although only independent workers who report tips to an employer are eligible.

How are tips paid out?
Tips are paid directly from Stripe to the worker's bank account. 

Why is digital tipping better?
Service workers keep 100% of their tips (after platform and processing fees), making digital tipping even more attractive.

What about reporting taxes?
KeepTips is way for employed workers to maximize tax-free take-home pay, especially by reporting tips properly.

Value add for companies and service workers.
Since only reported tips are tax-free, KeepTips helps workers document and report their tips for W-2 inclusion. 

Tax Reporting
Stripe or the employer handles workers’ tax filings reporting.

What does this mean for the Industry?

The tax break is expected to accelerate the move from cash to digital tipping, as digital platforms make it easier to track and report tips (a requirement for the exemption).

Is this easy to do?
Workers can sign up for KeepTips to take advantage of the tax benefit, making if compliance easy.

What are the limitations and considerations

Only tips reported to an employer and included on W-2s are eligible. Employers will be able to take advantage of the law to integrate reporting.

How long will this tax break last?
The provision is currently set to expire after four years, although it may be extended.

Contact and Support

Questions? keeptips2025@gmail.com