What to know about the 'no tax on tips' policy

Typically, the government wants a cut of any money you earn. But soon, tips earned on the job may become an exception to that rule.

Following promises from both parties during the last presidential election, the "no tax on tips" policy is now one step closer to becoming a reality after passing both the House and Senate. Should the bill become law, that would mean the end of federal income tax on tips — with some caveats.

How would the 'no tax on tips' policy work?

Put simply, the new bill would "make tip income exempt from federal income taxes," said The New York Times . Workers would still have to track and report tips, but instead of including them as income, "that amount will be subtracted from reported income as an 'above the line' deduction on a tax return." This would