INDIANAPOLIS (WISH) — The “Big Beautiful Bill Act” approved in Congress on Thursday includes a cut in the amount of federal taxes that tipped workers owe, partially keeping good on a campaign promise from President Donald Trump.

The bill, if signed by Trump on Friday as expected, will allow tipped workers to not pay federal taxes on the first $25,000 they earn in tips. After that, any additional tips and the full salary they earn from their employer will be subject to standard federal tax rates.

The tax cut will only apply to federal taxes; workers remain on the hook for state and local taxes.

Chris Burton co-owns Vicino and The Oakmont with his business partner Gus Vazquez. They are optimistic about this change for their employees. Burton said, “It could be very beneficial to servers, bartenders and anybody in the tipped industry.”

He said the new law leaves a lot to learn.

Vazquez said, “States like Indiana that do have state income tax, servers, and anybody that’s tipped and has a big part of their salary being tips is still going to be responsible for that so they still have to plan.”

The restaurant owners said they think the law could end up being a good thing for tipped workers’ bottom lines. Burton said, “There are a lot of servers and bartenders that don’t make a lot hourly and basically live on the tips completely and then at the end of the year have a very large tax bill.”

It is not just bartenders and servers seeing this change; this is across all tipped jobs. “Servers, bartenders, but also hairstylists. You know some of their income is going to be tips,” Vazquez said. “Valet people, third-party delivery people, Door Dash, Uber, all that stuff, there’s a lot of tips to go on there.”

This law will be phased out in 2028 near the end of Trump’s second four-year term, but Congress could extended the tax cut.

Previous coverage

• Yakym defends Medicaid work requirements, tax exemption for tips
• Indiana delegation votes along party lines on Trump spending bill

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