Write an article about How it helps, hurts diners, restaurant workers .Organize the content with appropriate headings and subheadings (h1, h2, h3, h4, h5, h6) and made content unique, Retain any existing tags from
In hospitality-rich South Florida, the new federal law making tips and overtime tax-free won’t touch the wallets of tipped restaurant workers until next tax season, but it’s already having a snowball effect on the diners they serve.
That’s because misinformation, confusion and even online ire has polarized workers and customers about No Tax on Tips, the deduction baked into President Donald Trump’s One Big Beautiful Bill Act and signed into law on July 4.
Mike Stocker/South Florida Sun Sentinel
A tip left by a diner at Olympia Flame Diner in Deerfield Beach. (Mike Stocker/South Florida Sun Sentinel)
No Tax on Tips takes up a sliver of that estimated $3.3 trillion megabill, letting tipped workers deduct up to $25,000 a year in reported tips from cash or credit card gratuities, while hourly employees can deduct up to $12,500 in overtime. It’s designed to ease tax burdens for hospitality workers, something then-candidates Trump and Kamala Harris each promised on the campaign trail last year before the general election.
Even so, No Tax on Tips has sparked a political flashpoint that could change customer interactions with tipped workers, from dining rooms to online spaces. There are already signs it’s affecting local waitstaff.
“I’m not comfortable talking about it while I’m working,” server Gregory Miranda says of No Tax on Tips, an awkward topic which often spirals into “mean and nasty” politics.
Confusion over No Tax on Tips also runs rampant in the Sun Sentinel-coordinated Let’s Eat, South Florida Facebook group, where complex rules have fueled arguments about “itemizing” deductions, who benefits from it and how the savings actually work. Some commenters have even said the tax break will make them tip workers less.
While it’s true that No Tax on Tips affects a fraction of South Florida workers, misinformation about it — if allowed to fester — can affect everyone who visits restaurants.
So we asked the folks who know No Tax on Tips best to break down the tax savings. Below, hospitality experts, restaurant owners and workers themselves explain who does and doesn’t qualify, which tips are eligible, and whether it helps or hurts those who earn them for a living.
Who qualifies for No Tax on Tips?
For the 2025 tax year, any front-of-house restaurant worker — think servers, bartenders, bussers, hosts — who “traditionally” earns tips can deduct up to $25,000 a year in reported tips paid with cash or credit cards. Hourly employees — think line cooks, dishwashers — can deduct up to $12,500 in overtime, the law says.
Workers would still owe payroll tax plus Social Security tax on tipped income.
Employees making up to $160,000 a year can take the extra break on top of the standard deduction ($15,750 in 2025). No Tax on Tips starts phasing out for incomes above $150,000, but most restaurant workers earn just a fraction of that amount, says Peter Ricci, director of Florida Atlantic University’s Hospitality and Tourism Management program.
“The average income of a server is around $30,000 a year, so most will fall into this space and benefit (from No Tax on Tips),” Ricci explains. “You’d have to be a very bad server or work in a restaurant with low check averages” to earn below the standard deduction in one year.
If there’s a downside, Martha Gimbel, the executive director of the Yale Budget Lab, told NPR in late June that very-low-income waitstaff won’t benefit from “No Tax on Tips” largely because they already have almost no taxable income in the first place.
There’s an even bigger problem, argues chef Allen Susser, a restaurant consultant who ran Chef Allen’s in Aventura for 25 years. While savings can reduce or erase workers’ total tax, No Tax on Tips does nothing to tackle the industry’s bigger issue of low wages.
“The industry is horribly underpaid as it is,” says Susser, one of 300-plus hospitality professionals who sent a group letter from the James Beard Foundation to Congress in June opposing No Tax on Tips. “It’s poverty work. It doesn’t earn you a liveable wage. Servers, dishwashers can hardly make it with one job, so they pick up shifts somewhere else.”
Federal data appears to agree with Susser. A 2024 report from the Census Bureau’s American Community Survey says about two-thirds of U.S. restaurant workers who work for tips earn so little that they don’t pay federal income taxes.
So how many South Florida restaurant workers does this affect? About 347,200 hospitality and leisure employees work between Miami and West Palm Beach, according to June data from U.S. Bureau of Labor Statistics, roughly 11% of the total region’s nonfarm workforce, but the data doesn’t say who’s tipped and who isn’t. Tips make up about 21% of a Florida worker’s income, according to a fall 2024 report by SquareUp.com.
Mike Stocker/South Florida Sun Sentinel
Gregory Miranda, 23, a tipped restaurant server at the Olympia Flame Diner in Deerfield Beach, delivers an order to a customer on Friday, July 18, 2025. (Mike Stocker/South Florida Sun Sentinel)
Front-of-house vs. back-of-house
A server at Olympia Flame Diner in Deerfield Beach for five years, Miranda first discovered No Tax on Tips on social media. Since May, though, he can’t seem to escape the debate, and now regulars have started asking about his politics.
The 23-year-old says he calmly tells diners that he “won’t discuss that” and asks if they want more coffee.
“I could be helping other servers with my time,” Miranda says. “I don’t want to be put into an awkward spot.”
Miranda worked 1,200 hours in 2024 to make $45,780 after tips, according to his returns. He says he paid no tax, which means if he makes the same in 2025, he thinks No Tax on Tips could give him “a substantial refund” after combining it with his standard deduction.
Even so, he wishes No Tax on Tips didn’t exist at all.
“The fairness issue bothers me,” he says. “It’s a pro for servers but a con for back-of-house. The line cooks work their butts off back there and get no tips. Why should servers pay less taxes on tips when the kitchen is the most important part of the restaurant?”
Mike Stocker/South Florida Sun Sentinel
Server Gregory Miranda takes an order from customer Mike Sliveri at Olympia Flame Diner in Deerfield Beach. (Mike Stocker/South Florida Sun Sentinel)
Miranda is right. While it’s true that front-of-house workers can claim the No Tax on Tips deduction, line cooks, dishwashers and other kitchen personnel can’t, says Lisa Cain, an assistant professor in Florida International University’s Chaplin School of Hospitality and Tourism Management.
“No Tax on Tips will just increase the wage disparity between front-of-house and back-of-house workers,” Cain explains. “The front-of-house can claim more tax deductions than hourly back-of-house workers. So how does this help kitchen workers, especially if their restaurant won’t allow overtime?”
In the Let’s Eat, South Florida group, commenters also took issue with the limited scope of No Tax on Tips, wondering why it brought tax breaks to certain jobs but not others.
“Why are servers deemed more important than secretaries, cooks, janitors, etc. working at the same wages?” commenter Jordan Lewis asked. “It was a dumb idea embraced by both parties.”
Susser thinks it will drive a deeper wedge between both halves of a restaurant.
“Why separate the two parts of the industry to benefit one part of the industry when they all should benefit?”
How will customer behaviors change?
Some experts wonder if inflation alongside tipping fatigue are already driving customers to tip less in the dining room, making it even harder for waitstaff to earn enough to deduct.
The fear isn’t unfounded: A March survey from finance website WalletHub says nearly nine in 10 Americans “think tipping has gotten out of control” with more tip suggestion screens showing up in more places, from self-checkout kiosks to Starbucks drive-thrus. Meanwhile, the cost of food rose 3% between June 2024 and June 2025, according to the Consumer Price Index.
“It could be a perfect storm for the customer to tip less,” says Ricci, the FAU professor. “These tipping scenarios have already irritated customers, so there may be some tip revenge. Could tips drop off one or two percent? Absolutely it could.”
Now add the No Tax on Tips savings for tipped workers, and Let’s Eat commenter Andrew Wright thinks it’s an excuse for customers like him to tip less than before.
“Am I expected to get a tax bill, then take the ‘leftover money’ and give it to someone who isn’t paying taxes on it in order to prop them up?” Wright wrote. “I will likely start to change my methods.”
Patty Miranda, co-owner of Olympia Flame Diner, says tipping behavior has already changed. Lingering inflation has driven up the cost of raw goods and driven more of her customer base, Canadian tourists and seniors, to stay home. Over the past 12 months, average tips have dropped from 25% to 19% of the bill, she says.
“I know that’s still pretty good, but our situation’s unique,” Miranda says. “We have great relationships with our regulars and a thin, reliable staff. So I’m happy for whatever volunteer tips we do get.”
And Ginny Wargo, a bartender at High Dive Bar in Fort Lauderdale, knows that customers will misunderstand how No Tax on Tips works and therefore tip less.
“I’m sure there’s going to be people who do it,” says Wargo, who has bartended for 42 years. “You’re dealing with the public when they’re at their best or they’re at their worst. You’ll always get people who think they shouldn’t have to tip. But they should, because tipping has worked forever, and I’ve always made a good living on it.”
Could workers lose Medicaid?
A Congressional Budget Office analysis suggests the One Big Beautiful Bill Act will strip health insurance from more than 10 million Americans over the next decade.
If that prediction comes true, tipped workers who lose Medicaid would spend far more replacing healthcare coverage than they would ever save from No Tax on Tips, restaurant consultant Susser argues.
“Workers would have to put way more money into healthcare, and Medicaid is very important to so many of these workers,” Susser says. “It makes no sense to take billions from Medicaid.”
One Fair Wage, a New York nonprofit that advocates for improved tipped wage laws, said in its May report that about 45% of the 2.75 million restaurant and tipped workers who currently rely on Medicaid may lose coverage.
But Anne McBride, vice president of Impact at James Beard Foundation, doesn’t think the bill’s estimated $1 trillion in Medicaid cuts will hurt most tipped workers.
She says the law makes current Medicaid enrollees file paperwork to prove they’re working, volunteering or attending school at least 80 hours a month, or qualify for exemptions like caring for a young child in order to keep their benefits.
“My hunch is the work requirements won’t be an issue,” McBride says. “It comes out to 20 hours a week, which is how much restaurant workers typically work already.”
No tax on gratuities, service fees
Some experts argue the No Tax on Tips deduction doesn’t consider common restaurant fees like automatic gratuities and service charges as taxable, even if they count toward a tipped worker’s income.
That’s because the IRS considers them wages and a “mandatory fee imposed by the employer” and not “discretionary payments given by the customer.”
Count Let’s Eat commenter Orlando Carrillo among the surprised. “I didn’t know the automatic gratuity was considered income,” he wrote. “That’s pretty messed up. In conclusion, just keep tipping your servers because no one benefitted from this.”
The problem, argues Cain at FIU, is that some restaurants pay auto-gratuities and service fees to servers as take-home tips separate from base wages. This could place a greater burden on restaurants and their waitstaff, she says.
“Auto-gratuities and service charges aren’t covered by No Tax on Tips, so it may cause a change in how restaurants calculate them on W-2s for tax purposes,” Cain says.
Michael Stanley, the owner of Sunness Supper Club in Fort Lauderdale, pays front-of-house workers $9.90 an hour, who then tip bartenders, bussers and support staff at the end of shift. Line cooks, meanwhile, earn “in the $20 range.” Some tips, he’s sure, are collected “under the table.”
Group parties of six or more who dine at Sunness are charged a 20% auto-gratuity — and all of it is kept by the servers, Stanley says.
“We do it to protect the servers to make sure they give great service, but also because customers might see a large bill and feel less willing to give a hefty tip,” Stanley says.
But waitstaff can’t deduct that from No Tax on Tips, he says, creating a massive “headache.”
“It makes things difficult for servers and restaurants to prove what was an auto-gratuity and what wasn’t,” Stanley says. “How do you prove that? Do we have to show receipts to the IRS? It’s just a bigger problem for servers. This deduction doesn’t really feel like it was well-thought out.”
Originally Published: July 22, 2025 at 4:28 PM EDT
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