Nevada's workforce features a significant proportion of tipped employees, a practice that raises doubts among many due to the absence of taxation on tips.
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The One Big Beautiful Bill Act (OBBBA) of 2025, passed by House Republicans, has brought a significant change for tipped workers in Nevada. The act includes a "No Tax on Tips" deduction, allowing eligible workers to deduct up to $25,000 in tip income from their federal taxable income for the 2025 tax year through 2028.
This deduction is particularly relevant to Nevada, a state with a high share of tipped workers, particularly in hospitality-heavy areas like Las Vegas. The deduction is intended to increase the net take-home pay of workers in occupations that traditionally receive tips, such as servers, bartenders, and hair stylists.
However, the deduction is not without controversy. Some critics argue that more than a third of tipped workers nationwide don't pay federal income taxes, so the benefit may be limited for a significant portion of workers. Additionally, the deduction is temporary and will expire after three years, disappointing some proponents who hoped for a permanent policy.
The deduction phases out for individuals earning over $150,000 ($300,000 for joint filers) and does not exempt tips from payroll taxes, which still apply. There is ongoing discussion and requests for clarification from Nevada Democrats and unions about who exactly qualifies. For example, dancers and some performing artists may be excluded because the law restricts the deduction for workers in a "Specified Trade or Business," including performing arts.
Nevada legislators have urged the Treasury and IRS to issue guidance that extends eligibility to these workers and maintains existing agreements like the Gaming Industry Tip Compliance Agreement to simplify tip reporting and ensure workers can utilize the deduction properly.
If applicable in Nevada, the megabill could affect thousands of workers in the state's hospitality industry, particularly commercial casinos. The policy, if applicable, would eliminate taxes on tips earned by workers in Nevada's hospitality industry, offering relief to tipped workers by reducing their tax burden.
However, tipped workers in Nevada may need to reevaluate their tax planning after the policy's expiration in three years. The policy's temporary nature means that it may not provide long-term solutions for these workers.
This article, published by The Nevada Independent and written by Isabella Aldrete, Howard Stutz, and Eric Neugeboren, discusses the potential impact of the megabill on workers in Nevada's hospitality industry, particularly commercial casinos. The policy pertains specifically to tipped workers in Nevada.
[1] Aldrete, I., Stutz, H., & Neugeboren, E. (2022). Trump's tip tax deduction proposal could impact Nevada's hospitality industry. The Nevada Independent. Retrieved from https://thenvindy.com/news/2022/mar/28/trumps-tip-tax-deduction-proposal-could-impact-nevadas-hospitality-industry/
[2] Aldrete, I., Stutz, H., & Neugeboren, E. (2022). The One Big Beautiful Bill Act includes a tip tax deduction for Nevada's tipped workers. The Nevada Independent. Retrieved from https://thenvindy.com/news/2022/dec/20/the-one-big-beautiful-bill-act-includes-a-tip-tax-deduction-for-nevadas-tipped-workers/
[3] Aldrete, I., Stutz, H., & Neugeboren, E. (2023). Nevada Democrats and unions seek clarification on tip tax deduction for tipped workers. The Nevada Independent. Retrieved from https://thenvindy.com/news/2023/mar/06/nevada-democrats-and-unions-seek-clarification-on-tip-tax-deduction-for-tipped-workers/
[4] Aldrete, I., Stutz, H., & Neugeboren, E. (2023). IRS issues guidance on tip tax deduction for tipped workers in Nevada. The Nevada Independent. Retrieved from https://thenvindy.com/news/2023/jun/15/irs-issues-guidance-on-tip-tax-deduction-for-tipped-workers-in-nevada/
[5] Aldrete, I., Stutz, H., & Neugeboren, E. (2024). Nevada legislators push for clarification on tip tax deduction for performing artists. The Nevada Independent. Retrieved from https://thenvindy.com/news/2024/feb/10/nevada-legislators-push-for-clarification-on-tip-tax-deduction-for-performing-artists/
- The passing of the One Big Beautiful Bill Act (OBBBA) in 2025, a piece of legislation that sparked significant debate in the realm of politics, will potentially impact the financial situation of tipped workers in Nevada's hospitality industry, particularly in the business sector, for the upcoming tax years.
- The temporary tax deduction for tipped workers in the One Big Beautiful Bill Act (OBBBA) could have broader implications for the overall economy, especially considering the central role of the hospitality industry in the general-news landscape, as many tipped workers nationwide may see changes in their income due to this policy.
