As part of President Donald Trump’s “Big Beautiful Bill,” tipped workers are now able to exclude tips from their taxable income.

This means these workers will be able to keep more of their tips in their pockets. Experts say that ultimately, this might not make as big of an impact as workers would like.

“What is really holding tipped workers back is low wages, not taxes,” said Chris Meyer, a research analyst at the Maryland Center for Economic Policy.

Two separate bills were proposed in the Maryland legislature earlier this year that addressed a statewide No Tax on Tips Act. But both bills died after budget concerns and a lack of appetite to follow up on the issue, according to Meyer.

The state act proposed to gradually increase the state minimum wage of $15, which was established in January of last year, to $20 in 2028. It also proposed to gradually eliminate the tip credit, which allowed employers to count tips toward minimum wage obligations.

Here’s what tipped workers need to know about No Tax on Tips.

What’s in the federal law?

The federal law, which was included in the recently passed budget, lets tipped workers deduct up to $25,000 in tips from their taxable income.

While it doesn’t apply to Maryland state taxes, it could bring some relief in federal taxes. The state is also still figuring out how this change might affect some aspects of state taxes, but at least for now, workers should file taxes regularly.

“There’s nothing people will need to be preemptively worried about,” said Lucy Smart, director of Tax Education and Training at CASH Campaign of Maryland.

Tipped workers will still be responsible for paying Social Security, Medicare and any other payroll taxes on their tips.

The act is set to expire in 2028, but will likely be renewed because of its popularity, according to Jessica Lopez, chair of the Maryland Association of CPAs’ State Tax Committee.

Who is included in this?

The Treasury Department issued a preliminary list in September of occupations that qualify for the tax break within 90 days of the bill’s passage. The list included 68 occupations — ranging from locksmiths to makeup artists — that “customarily and regularly received tips” on or before Dec. 31, 2024. (You can see the full list below.)

The Treasury and the IRS anticipate the final list to be “substantially the same” as this one.

There’s a phase-out for workers making over $150,000 a year, or $300,000 if filing jointly.

That means over 105,000 tipped workers in Maryland could see a change in their federal tax refunds in the next couple of years.

How much could it save workers in Maryland?

Experts we talked to say it could mean a bit more in workers’ pockets at the end of the year. While this could bring some relief to tipped workers, it might not be a significant amount.

While the law specifies cash tips, experts say that this will also apply to charged tips. If you pay with a credit card and add tips, these tips can be included in the deduction.

To make this even clearer, Lopez gave this example:

Before the federal act, a single taxpayer working as a tipped employee and earning a gross pay of $20,000, including $15,160 in tips, would have a taxable income of $4,250. (That’s gross pay minus the standard, fixed deduction of $15,750 for all single taxpayers.)

Because this would place them into the smallest tax bracket, their federal income tax, or what they pay to the IRS, would be 10% of their taxable income — so $425.

Starting this year, tips will be deducted from their taxable income. In this example, that would mean they will not owe any taxes to the IRS and might qualify for a refund.

In some cases, this can mean saving a couple of hundred to thousands of dollars in taxes.

Keep in mind, this is only an example and should not take the place of professional tax advice.

When will this take effect?

The federal No Tax on Tips Act will go into effect in 2025. While updated IRS withholding tables aren’t out yet, it will most likely mean refunds for taxes withheld or reductions in taxes withheld in the first half of 2025.

Businesses and individuals should document and track tips as much as possible in case of an audit, said Lopez. The IRS says workers should keep a daily record of tips and must report tips on their income tax return.

Experts say the state laws likely won’t come up again in the near future.

How will this affect federal benefits?

The No Tax on Tips Act comes with a bit of a caveat, as the extra take-home money might make some workers ineligible for federal benefits like Medicaid and SNAP. These programs are based on monthly income, and an increase might push workers over the eligibility requirements.

What are wage advocates saying?

Angelo Greco, spokesperson for the One Fair Wage Coalition, said the solution lies in increasing wages, not giving tax breaks.

“‘No tax on tips’ is a great slogan, but it only applies to a few,” said Greco, adding that while it might bring relief to some workers, it won’t be much help to a lot of them.

Tipped workers who may qualify for the deduction

Here is the Treasury Department list of occupations and some examples of each that may qualify for the “no tax on tips” deduction.

Beverage and Food Service

• Bartenders (mixologist, sommelier)
• Wait staff (cocktail waitress, dining car server)
• Non-restaurant food servers (beer cart server, boat hop)
• Dining room and cafeteria attendants, bartender helpers (bar back, busser)
• Chefs and cooks (pastry chef, caterer, food truck cook)
• Food preparation workers (salad maker, kitchen steward)
• Fast food and counter workers (barista, ice cream server)
• Dishwashers (dish room worker, silverware cleaner)
• Host staff, restaurant, lounge and coffee shop (maître d’hôtel, dining room host)
• Bakers (bread baker, pastry finisher)

Entertainment and Events

• Gambling dealers (blackjack dealer, pit clerk)
• Gambling change persons and booth cashiers (slot attendant, mutuel teller)
• Gambling cage workers (casino cashier, cage cashier)
• Gambling and sports book writers and runners (bingo worker, race book writer)
• Dancers (club dancer, dance artist)
• Musicians and singers (instrumentalist, lounge singer)
• Disc jockeys, except radio (deejay, club DJ)
• Entertainers and performers (comedian, clown)
• Digital content creators (streamer, social media influencer)
• Ushers, lobby attendants, and ticket takers (ticket collector, theater usher)
• Locker room, coatroom, and dressing room attendants (coat checker, bathhouse attendant)

Hospitality and Guest Services

• Baggage porters and bellhops (hotel baggage handler, curbside airport check-in assistant)
• Concierges (hotel guest service agent, activities concierge)
• Hotel, motel and resort desk clerks (front desk clerk, registration clerk)
• Maids and housekeeping cleaners (hotel maid, housekeeping staff)

Home Services

• Home maintenance and repair workers (handyman, house painter)
• Home landscaping and groundskeeping workers (lawn mower, gardener)
• Home electricians (electrician)
• Home plumbers (pipe fitter, sprinkler installer)
• Home heating and air conditioning mechanics and installers (chimney sweep, air conditioning repairer)
• Home appliance installers and repairers (washing machine installer, dishwasher repairer)
• Home cleaning service workers (pool cleaner, window washer)
• Locksmiths (safe installer, key maker)
• Roadside assistance workers (tow truck driver, tire changer)

Personal Services

• Personal care and service workers (butler, personal valet)
• Private event planners (wedding planner, party planner)
• Private event and portrait photographers (wedding photographer, headshot photographer)
• Private event videographers (wedding videographer)
• Event officiants (funeral celebrant, clergy)
• Pet caretakers (kennel worker, pet walker)
• Tutors (reading tutor, math tutor)
• Nannies and babysitters (au pair, child sitter at hotels and gyms)

Personal Appearance and Wellness

• Skin care specialists (facialist, spa esthetician)
• Massage therapists (masseuse, sports massage therapist)
• Barbers, hairdressers, hairstylists and cosmetologists (wig stylist, beautician)
• Shampooers (scalp treatment specialist, shampoo assistant)
• Manicurists and pedicurists (nail technician, fingernail sculptor)
• Eyebrow threading and waxing technicians (eyebrow waxer)
• Makeup artists (wedding makeup artist, party makeup artist)
• Exercise trainers and group fitness instructors (aerobics trainer, yoga instructor)
• Tattoo artists and piercers (ear piercer, nose piercer)
• Tailors (seamstress, clothing alterations worker)
• Shoe and leather workers and repairers (cobbler, shoe shiner)

Recreation and Instruction

• Golf caddies (golf caddie, golf cart attendant)
• Self-enrichment teachers (knitting instructor, piano teacher)
• Recreational and tour pilots (hot air balloon aeronaut, skydiving pilot)
• Tour guides and escorts (museum guide, sightseeing guide)
• Travel guides (cruise director, river expedition guide)
• Sports and recreation instructors (diving instructor, tennis teacher)

Transportation and Delivery

• Parking and valet attendants (parking garage attendant, valet parker)
• Taxi and rideshare drivers and chauffeurs (cab driver, personal driver)
• Shuttle drivers (airport shuttle driver, rental car shuttle driver)
• Goods delivery people (pizza delivery driver, furniture delivery person)
• Personal vehicle and equipment cleaners (car wash attendant, boat waxer)
• Private and charter bus drivers (motor coach bus driver, tour bus driver)
• Water taxi operators and charter boat workers (water taxi captain, charter boat steward)
• Rickshaw, pedicab, and carriage drivers (horse-drawn carriage driver, bike taxi driver)
• Home movers (furniture mover, packer)