April 15th is a dreaded date for many in the hospitality industry. It’s stressful knowing you owe a significant amount in taxes, and to make sure you've set aside the right amount of “tax money.” But it seems there may be relief coming soon, and the tax money that many of our cleaners and handymen have been setting aside over the past six months could turn into a welcome bonus.
Two major developments are in play: Trump’s “Big Beautiful Bill” Act and Ted Cruz’s “No Tax on Tips” Act.
If passed, Cruz’s bill would allow tipped employees to deduct up to $25,000 of reported tips from their federal taxable income. Not only would the first $25,000 be tax-free, but it could also lower tipped employees' overall taxable income. Lower taxable income means a potentially lower tax bracket, which reduces the marginal tax rate on the remaining income. The bill passed in the Senate on May 20th and has been “held at the desk” in the House since May 26, 2025.
On the other hand, there’s the controversial “Big Beautiful Bill”, which has been making waves. It proposes a “more beautiful” form of tax relief by reducing adjusted gross income for all reported tips, with no cap disclosed so far.
Our take on the implications for the STR industry
We wanted to explore if this tax reform might create a loophole that STR property managers could use to increase profitability. For example:
Could these tax benefits apply to cleaners and maintenance technicians?
The key issue is whether these positions are considered as ones that “traditionally and customarily receive tips during a given taxable year.” Unlike leaving a $20–$30 tip on a $100 restaurant bill, our industry is more nuanced. The positions that will qualify are going to receive more clarity and discussion if and when either of these acts passes.
Could we see property managers begin negotiating lower piece rates with contractors under the promise that the difference will be made up in tips?
Let’s imagine a speculative (and concerning) scenario: a property manager says to their housekeeping contractor, “Reduce your rate from $100 per unit to $50, and I’ll ensure you receive various tips from guests—plus, I’ll personally make up for anything the guests don’t tip. Best of all, the difference will be made up in tips you don’t need to pay taxes on, so everyone wins.”
While this might sound appealing at first glance, it clearly violates the IRS’s definition of a legitimate tip: “In order to be considered a qualified tip, the tip amount must be paid voluntarily, is not subject to negotiation, and is determined solely by the payor.” When tips become a substitute for wages—or are negotiated as part of compensation—they are no longer truly voluntary and could disqualify both the payer and the recipient from any associated tax benefits. But it somehow happened in the restaurant industry, so who's to say it couldn't happen here as well?
We hope this kind of practice does not emerge. Airbnb and Vrbo already allow hosts to collect separate cleaning fees from guests, which are intended to fairly compensate cleaners—not to be replaced or offset by unreliable and potentially untaxed tip income.
Bottom line:
It doesn't seem like “no taxes on tips” will create a loophole that will directly apply to vacation rental management.
However, if contractors like housekeepers do qualify for any kind of tax relief, it could still be a meaningful benefit. Less taxes means our contractors will have a higher take home pay, which can lead to a higher quality of life and higher job satisfaction. This can help reduce turnover, and we all know that finding and retaining the right team members is a major key to success.
Without digging into the rest of the bill—and just narrowly focusing on tipped employees, many of whom I count as close friends—I would like to see at least Ted Cruz’s bill come to fruition, even if the broader Trump bill doesn’t move forward. It’s a tangible step toward recognizing the hard work of tipped professionals and giving them some long-overdue financial relief.
