New York just rolled out a major change that’s making waves in the service industry — the arrival of the ‘No Tax on Tips’ law. Included in the broader ‘One Big Beautiful Bill’ passed earlier this year, this new law is part of a bigger push to make living and working in New York more affordable.
For workers who rely on tips to make ends meet, this new law is a game-changer. It lets them deduct up to $25,000 in tips from their taxable income between January 2025 and January 2028 — offering real savings for tens of thousands of New Yorkers. So who qualifies, and what does this mean for everyday workers? Let’s break it down.
Reforms
This year, New York has introduced a wide range of affordability measures, aimed at helping middle- and low-income families across the state. Governor Kathy Hochul’s administration has focused on tax relief, childcare expansion, and one-time rebate payments to offset the impact of inflation and rising living costs.
Some key initiatives include:
- Expanding the Child Tax Credit, making 118,000 Western NY families newly eligible
- Reducing income taxes for over 507,000 households, the lowest tax rates in 70 years
- A $2.2 billion investment in childcare, making it more affordable and accessible
- Distribution of inflation rebate checks worth up to $400
State leaders have praised the Governor’s plan. Assembly Majority Leader Crystal Peoples-Stokes said, “We know that when people have more money in their pockets, that money gets spent in their neighborhoods.”
Now, the ‘No Tax on Tips’ law adds another tool for workers — specifically those in service roles — to keep more of their hard-earned income.
Tips
The ‘No Tax on Tips’ provision comes from a new federal tax package designed to ease the financial burden for service and hospitality workers. While many in these roles rely heavily on tips, they’ve historically had to report and pay taxes on every dollar they earn — something the new law now changes.
Here’s what the law does:
- Workers can deduct up to $25,000 in tips from their taxable income
- Applies to tax years between January 2025 through January 2028
- Reduces total income reported to the IRS, potentially lowering tax bills and increasing refunds
It’s not just for waiters and bartenders, either. A wide range of industries can qualify.
Sectors
The law applies to qualifying workers in tip-based roles across multiple sectors. Here’s a list of professions that may be eligible:
| Sector | Example Roles |
|---|---|
| Beverage & Food Service | Servers, bartenders, baristas |
| Entertainment & Events | Ushers, performers, hosts |
| Hospitality & Guest Services | Hotel staff, bellhops, concierge |
| Home Services | Cleaners, movers, handymen |
| Personal Services | Nannies, caregivers, housekeepers |
| Wellness & Appearance | Hairstylists, estheticians, nail techs |
| Recreation & Instruction | Trainers, coaches, tour guides |
| Transportation & Delivery | Rideshare drivers, food couriers |
The IRS will issue updated W-2 and 1099 forms to reflect these deductions starting in January 2025. This means both employers and workers should prepare for changes in tax reporting in the new year.
Rebates
Alongside the tip deduction, New York continues offering state-level tax rebates for eligible individuals. One of the most notable is the School Tax Relief (STAR) program, which gives property tax breaks to homeowners.
There are two versions of STAR:
- Basic STAR – For eligible working homeowners
- Enhanced STAR – For qualifying senior homeowners, offering larger rebates
To qualify for either, residents must meet income thresholds and ensure all tax filings are up to date. These rebates can offer meaningful savings on annual property tax bills, especially for those living in high-cost areas.
Outlook
With the No Tax on Tips law now in place, thousands of New Yorkers in tip-based jobs will see real relief on their federal taxes starting in 2025. This is just one of many initiatives designed to help residents keep more of what they earn, at a time when affordability is more important than ever.
When paired with state-level rebates, expanded credits, and lower income taxes, the outlook for working-class New Yorkers — especially those in service sectors — is starting to look a little brighter. For many, this law means a lighter tax bill, a larger refund, and a greater sense of financial stability.
FAQs
What is the ‘No Tax on Tips’ law?
It lets workers deduct up to $25,000 in tips from taxable income.
Who qualifies for the tip deduction?
Service workers like servers, drivers, stylists, and hotel staff.
When does the tip tax law start?
It takes effect from January 2025 through January 2028.
Does this affect tax forms?
Yes, new W-2 and 1099 forms will reflect the tip deductions.
What is the STAR rebate?
A property tax break for eligible New York homeowners.
