Donald Trump returns to Las Vegas this Wednesday to present the tax reduction for workers who depend on tips as one of the main economic achievements of his government.

The choice of Nevada is not coincidental. Hotels, casinos, restaurants, bars and tourist services account for an important part of local employment, and Trump has stated that it was precisely Las Vegas workers who inspired his “no tax on tips” proposal.

However, it is no longer just a promise. The measure was incorporated into the Republican tax package approved in 2025 and can be applied to eligible tips received since that year. The visit will also have an electoral component: Trump will appear alongside Republican candidate Marty O'Donnell in a competitive district currently represented by Democrat Susie Lee.

What “no tax on tips” really means

The expression can be misleading. The new law does not automatically eliminate all tip taxes. What it establishes is a federal deduction that allows up to $25,000 in qualified tips to be subtracted from income subject to federal income tax. Reducing taxable income can decrease the final amount a person must pay or increase their refund.

Tips continue to form part of the worker's income and must be declared. Additionally, they remain subject to Social Security and Medicare taxes, known as payroll taxes.

For that reason, “no tax on tips” should not be interpreted to mean that the worker can stop reporting that money or that every dollar received is completely tax-free.

You can see: How much does a hotel worker earn in Las Vegas: hourly wages and higher-paying positions

How much can a worker deduct

The maximum deduction is $25,000 per annual return. It is available to both employees and the self-employed, as long as the tips were earned in an IRS-recognized occupation and are correctly reported.

The benefit begins to be reduced when your modified adjusted gross income exceeds:

Married taxpayers must file jointly to access the deduction. A valid Social Security number is also required.

The deduction can be used even if the taxpayer takes the standard deduction and does not individually itemize his or her expenses.

Which Las Vegas Workers Can Benefit

By December 31, 2024, the Treasury Department and the IRS approved a list of more than 70 occupations that regularly receive tips. Among the categories included are workers from:

In Las Vegas, the measure may benefit servers, bartenders, bellhops, doormen, baggage handlers, parking lot workers, drivers, room staff and certain casino employees.

The final rules expressly include croupiers or gambling dealers, table supervisors who fall within that category and workers who change chips or attend to cash registers related to the game.

They also recognize certain payments made with casino chips as eligible tips, as long as they are exchangeable for a fixed amount of money.

That doesn't mean all employees at a hotel or casino automatically qualify. The benefit depends on the specific occupation and whether the payment meets the federal definition of a tip.

What payments count as qualified tips

The IRS considers tips that the customer voluntarily gives to be qualified. They can be received through cash, credit or debit cards, checks, payment applications, distribution or tip pool and/or casino chips convertible into money.

The amount must be reported on forms such as W-2, 1099 or, when applicable, directly through Form 4137.

A mandatory service charge added by the restaurant, hotel, or business is not necessarily considered a qualified tip, because the customer does not voluntarily decide how much to pay.

Gifts that cannot be directly converted into a fixed amount of money, such as tickets, meals, services, or certain digital assets, also do not count.

How to claim the benefit

Workers must use the new Schedule 1-A, which is attached to Forms 1040, 1040-SR, or 1040-NR. This annex calculates the deduction for tips and other reductions incorporated by the same law, such as those related to overtime, interest on vehicle loans and taxpayers over 65 years of age.

The deduction could already be applied to tips earned in 2025 during the 2026 tax season.

Those who have already filed their return and discover they qualified could file an amended return using Form 1040-X. The IRS recommends first reviewing the final list of occupations and Schedule 1-A instructions.

An example of how it works

A waitress who received $18,000 in qualified tips during the year could deduct those $18,000 from her federal income taxable income, provided she meets other conditions. That doesn't mean you'll receive a check for $18,000 or save that entire amount.

Savings will depend on your total income, your tax bracket, your filing status, and other credits and deductions. Also, the amount of taxes withheld during the year.

The deduction reduces taxable income; It does not work as a dollar-for-dollar credit.

Can immigrants with ITIN claim it?

The final rules state that the worker must include a Social Security number valid for employment on his or her return. A person who files taxes only with an Individual Taxpayer Identification Number (ITIN) cannot claim this deduction under current rules.

This requirement may leave out part of the immigrant workforce who declare income and pay taxes, but do not yet have Social Security authorized to work.

The deduction is temporary

The benefit applies to tax years 2025 through 2028. Unless Congress extends it, it will no longer be available after that period.

The temporary nature of the measure will be one of the central points of the political debate. Republicans present it as a tax cut aimed at workers, while Democrats question the overall fiscal package for its effects on the deficit and assistance programs.

What Tipped Workers Should Do

The IRS recommends keeping complete records of tips earned during the year. It is important to verify that:

Self-employed workers must also maintain sufficient documentation to show where tips come from. If applicable, the deduction cannot exceed the net income generated by the activity in which they were received.

What changes and what does not change

The measure may significantly reduce federal income taxes for some Las Vegas workers, but it does not transform tips into invisible income for the government.

The benefit also does not apply in the same way to all workers. It depends on the occupation, the type of payment, the annual income, the form of presentation and the documentation available.

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