As customers, leaving a tip is often more of a math exercise than a financial decision.

We have all had that brief flash of anxiety when looking at the bill and quickly trying to calculate percentages in our head. The speed of those calculations not at all helped by the two glasses of wine we may have had with dinner.

But to the server on the other end, those tips are wages. It’s how they pay their bills. And just like all wages, they’re taxed. At least until this summer, when the passage of the “The Big, Beautiful Bill” exempted tips from federal income tax for millions of service workers around the country. With Vegas being such a service-oriented town, the bill is likely to have more of an impact on Nevadans than residents of any other state.  

But is “No Tax on Tips” a boon for service workers, or will there be unintended consequences when making such a dramatic shift in how many Nevadans earn a living?

Below, we will dive into the bill and look at how it may impact service workers, businesses, and the customers that rely on them to make this city the international destination that it is.

How Did We Get Here

If you think back to the 2024 presidential election — which already feels like a lifetime ago — both Republican candidate Donald Trump and Democratic candidate Kamala Harris campaigned on a promise to eliminate federal taxes on tips. In other words, no matter who won, some version of a “No Tax on Tips” policy was likely in the cards.

Following Republican victories in the House and Senate, President Trump was able to push through what he called the One Big, Beautiful Bill. This omnibus bill — a single, sweeping package combining numerous smaller measures — included everything from trillions in defense spending to the no-tax-on-tips provision, which changes how servers and other tipped workers report income on their federal returns.

After weeks of negotiations, the bill passed both chambers of Congress and was signed into law by President Trump on July 4, 2025.

Who Does This Apply To?

This is where things get a little interesting. Currently, the bill states that this applies to workers who “customarily and regularly receive tips.” However, an official list of occupations and industries is set to be released in October 2025.

Despite the official list not yet being available and the possibility of some surprises, it is likely to cover just about every service worker and hospitality worker in Vegas. There are some exceptions for those who are self-employed. Self-employed individuals who accept tips regularly can deduct those tips, but only if the amount is not greater than their net income.

Also, Specified Service or Trade Business (SSTBs) do not qualify for this exemption. This includes fields such as law, healthcare, consulting, and other similar professional services.

Breaking Down How No Tax on Tips Works

To start, “No Tax on Tips” applies to all cash tips that workers receive. There’s been a good deal of misunderstanding over the definition of “cash tips.” Contrary to how it sounds, cash tips are not just tips handed over in physical currency. The IRS just uses this term to separate monetary compensation from gifts, such as cars or jewelry, which can also be considered income.

Cash tips cover all tips, including those added to credit card receipts or point of sale (POS) transactions, like you see at coffee shops or cafes when checking out.

Importantly, mandatory service fees are not counted as tips in this legislation. So, if businesses currently apply mandatory service fees (mandatory tips) and share a portion of that with employees, they may need to reconsider that practice if their employees want to avoid paying federal income tax on that money.

Next up is the total amount that service workers can claim an exemption on. The current limit is $25k in total tip income. However, not every income level will qualify. The deduction begins to phase out at a modified adjusted gross income (MAGI) over $150,000 for single filers, or $300,000 for joint filers. 

Both itemized filers and those taking the federal standard deduction can take advantage of the “No Tax on Tips” exemption.

Who Is Helped By No Tax on Tips?

Nationally, about 30% of tipped workers already don’t pay any income tax because they don’t meet the threshold to pay any income tax at all. For those workers, this new tax policy will not affect them.

The benefit will be mostly felt by service workers who cater to higher-end customers and receive a substantial amount in cash tips that their employer reports to the IRS. In Vegas, most bartenders and cocktail waitresses should experience a tax reduction due to the high volume of customers they see, which raises the percentage of income they receive from tips.

Why New Reporting Requirements Could Hurt Some Las Vegas Hospitality Workers

The “No Tax on Tips” provision doesn’t just impact workers; there are also new reporting requirements for businesses. Employers are now required to report the total amount of cash tips separately on the employee’s Form W-2 and must also report the qualifying occupation of the tip recipient.

The reason this is important is that hospitality workers can often receive government benefits, mostly Medicaid, at a higher rate than other occupations. Although no public data is available on how many Vegas hospitality workers receive government benefits, it’s widely acknowledged to be a sizable percentage.

Depending on how employers choose to now report tips, it could cause some workers to have a total income that no longer qualifies for certain benefits. This would happen if previously those workers did not claim the full income they received from cash tips on their federal income tax returns.

Nevada uses modified adjusted gross income to determine eligibility for Medicaid for working-age, healthy adults. That calculation includes tip income even if that income is now tax-exempt. That’s because “No Tax on Tips” is an above-the-line deduction, not an exclusion from gross income.

Another argument is that the new tax policy could actually hurt workers if customers adjust their tipping habits. The concern is that customers, knowing servers no longer pay taxes on tips, might start tipping less. But it’s impossible to predict how people will actually respond. Before this law, most customers didn’t factor a worker’s tax burden into their tipping decisions, so it’s entirely possible nothing will change.

An argument could also be made that some people will tip more, knowing the server will keep the full amount– similar to how food delivery services such as DoorDash make a point of informing customers that the full tip goes toward the driver, which is designed to lead to higher tips.

No Tax on Tips Isn’t the Only Provision That Impacts Nevada

While “No Tax on Tips” got much of the media attention in Las Vegas, there was something else tucked into the omnibus bill that could end up harming the same service workers that “No Tax on Tips” was meant to help. 

In the bill, the way gambling losses can be deducted on federal tax forms was changed. After the bill’s passage, gamblers can now only deduct 90% of losses instead of the 100% that was allowed previously. This impacts gamblers, mostly high-rollers, but it may impact service workers such as dealers, waitresses, and bartenders who interact with those gamblers every day.

Derek Stevens, owner of Circa and Circa Sports, recently told KTVN news that he’s already heard from gamblers that they will take their money offshore to avoid the additional tax penalty. If this happens, the loss of high-rollers and potentially big tippers could hurt the average service worker who depends on generous tips from those gamblers.

Soon after the bill passed, Rep. Dina Titus, D-Nev., introduced a bill of her own to repeal the change in gambling deduction rules. Currently, it has nearly unanimous support from the House delegation.

States like Nevada could also sue the federal government over federal tax policy. In this case, it could be argued that taxing gambling earnings at 100% while only allowing 90% deductions is essentially punitive and unfairly harms Nevada more than other states.

With a Republican governor, such legal action may not be likely, but a legislative fix is going to have nearly full bipartisan support in Nevada. However, if that doesn’t work and there’s enough support to take further action, a lawsuit could be filed.

Lawsuits against the federal government are not uncommon, and recently, we’ve seen a flurry of lawsuits from states like California over the federal government’s role in immigration enforcement.

The Future of No Tax on Tips and the Vegas Service Industry

This new tax policy is currently more of an experiment than a permanent change. It sunsets in 2028 and will have to be renewed for it to continue. 

In Nevada, this could create some bargaining issues as the Culinary Union’s contract also expires in 2028. If it looks like the “No Tax on Tips” will sunset, it could create leverage for the Union in negotiations, as well as increase their voice in political discourse during the next presidential election season.

Sources:

https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors

https://budgetlab.yale.edu/news/240624/no-tax-tips-act-background-tipped-workers

https://www.congress.gov/bill/119th-congress/senate-bill/129

https://www.bls.gov/eag/eag.nv_lasvegas_msa.htm