The U.S. Senate has unanimously passed a bill that would allow tipped workers to deduct a portion of their tips from their taxable income.

This tax deduction would cover tips up to $25,000. The bill also includes extended business tax credits for payroll taxes on tips in beauty and spa services.

The proposal was spearheaded by Senator Ted Cruz of Texas and received bipartisan support, a rare occurrence for significant legislation.

Eligibility for the tax deduction comes with some restrictions. Employees whose compensation exceeded $160,000 in the previous tax year will not be eligible.

The bill applies to cash tips received by workers in customarily tipped occupations such as servers, barbers, and estheticians.

According to estimates, approximately 4 million workers held tipped positions in 2023. Tips must be reported by the employee to the employer.

The bill is based on the projection that a non-tipped worker was at least 10 years older than a typical tipped worker in 2023.

The Peter G. Peterson Foundation estimates the bill would reduce federal revenues by $110 billion over a decade.

The bill aligns with a campaign promise made by former President Donald Trump.

The bill now moves to the House of Representatives for consideration before potentially becoming law.