Taxes on Tips: What is going on in 2026?

Where does your tip go after you pay?

If you work in hospitality, you've probably heard about what's been happening across the Atlantic.

In 2024, Donald Trump made "no tax on tips" one of his catchiest campaign slogans, shouted it at a rally in Las Vegas, and won the election. Then in July 2025, a version of it actually became law: US restaurant workers can now deduct up to $25,000 of tip income from their federal taxes.

Sounds great, right? Well — sort of. The fine print quickly dampened the excitement. Payroll taxes (Social Security and Medicare) still apply.

The law expires in 2028. And about a third of tipped workers in the US earn so little they already owe no income tax, meaning they get nothing from the change.

Still, the debate it sparked is real, and it's worth asking: how do things work for those of us on this side of the ocean? The answer, as ever in Europe, is: it depends where you are.

GERMANY: Tax-free, and that's the law

Of all the countries in this roundup, Germany has arguably the most worker-friendly rule. Since 2002, voluntary tips paid directly by a customer to an employee are fully exempt from income tax — with no cap on the amount. The key word is "voluntary": if the tip is freely given by the customer, it belongs to you, tax-free. If it's a mandatory service charge printed on the bill, that's a different story — it's taxable. The line between the two can get blurry with card payments and shared tip pools, but the principle is clear. German hospitality workers quietly enjoy something US servers are still fighting for.

FRANCE: a temporary exemption that keeps getting extended

France introduced a tip tax exemption in 2022, originally as a post-Covid measure to help the battered hospitality sector. Tips became free of income tax and social contributions for workers earning below 1.6 times the minimum wage. The measure was supposed to be temporary — but it kept getting renewed. It covered income through the end of 2025, and as of early 2026, the French government was debating whether to extend it further or finally bring tips back into the tax net as part of broader budget tightening. French unions are divided: some worry that tax-free tips give employers an excuse to avoid raising base wages. Sound familiar?

In Italy, taxes on tips are only 5%, but very few Italians are used to tipping.

ITALY: The 5% Flat Rate

Italy took a more structured approach. Following a 2021 Supreme Court ruling that tips count as employment income, the government introduced a flat 5% substitute tax on tips for hospitality workers — instead of the regular IRPEF income tax rates (which can reach 43% for higher earners). The 2025 Budget Law expanded the scheme: it now applies to workers earning up to €75,000 a year (up from €50,000), and covers tips up to 30% of annual salary (up from 25%). It's not zero, but 5% is a far cry from what a typical Italian waiter would pay on regular income. If you're working the floor at a busy restaurant in Milan or Rome, this is quietly one of the better deals in Europe.

UK: Fully taxable but with new worker protection

In the UK, tips are fully subject to income tax — from the very first pound, with no minimum threshold. Whether you receive cash or card tips, you're expected to declare them. National Insurance contributions may also apply depending on how tips are distributed. The one significant development in recent years has been the Employment (Allocation of Tips) Act, which came into force in July 2024. It requires employers to pass on 100% of tips to workers — previously, many were quietly pocketing a share. So while the tax situation hasn't changed, the fairness of tip distribution has improved. For UK hospitality workers, that's real progress, even if the taxman is still waiting at the end of it.

CZECH REPUBLIC: Tips are income, but let's not talk about cash

According to Czech tax rules, tips are treated as ordinary income. The employer is responsible for handling the tax side of things: they collect the tips, apply the relevant income tax (around 21%), and only then pass the net amount on to employees. But in reality, several restaurants in Prague have a cheeky "tips are appreciated in cash" quote, written on the bill. Another common practice is to add 10% to the bill to automatically for groups of +8 people. Wages in the Czech Republic are not the highest, and tips help a lot in making this job appealing.

So, what does all this mean?

Looking at the map, European hospitality workers are in a mixed but — in some ways — more stable position than their US counterparts.

In most European countries, base wages don't depend on tips to reach a living wage (unlike the US, where a federal tipped minimum wage of $2.13 per hour still exists in some states).

Tips are genuinely extra, not survival money.

That said, the US debate has shone a light on a real question: should tips be treated the same as wages? Germany says no. France and Italy have said "sort of — but with conditions." The UK says yes, fully, but at least makes sure you actually receive them.

What's striking is that "no tax on tips" resonated so strongly with American workers that even the opposition party endorsed it during the campaign. In Europe, the conversation is slower, quieter, and more tangled up with broader questions about wage levels, social contributions, and who ultimately benefits.

If you're a server, bartender, or host reading this: the rules vary enormously depending on where you work. It's worth knowing yours — because in some countries, you may already be better off than you think.

The rules around tips are changing — and so is the conversation. Follow We Are Food to stay on top of what matters to the people behind the plate.