A major shift may be on the horizon—one that could redefine compensation for field technicians and raise the standard of service across the home services industry. At the heart of this change is President-elect Donald J. Trump’s proposal to make tips tax-free.

Inspired by a Las Vegas waitress who shared with Trump how tax deductions on tips eroded take-home pay, this bold move has gained momentum as a strategy to empower and uplift the working class. The proposal aims to let workers keep more of their earnings by eliminating federal income taxes on tips—putting more money directly into the hands of the people who’ve earned it. 

While the proposed tax-free tipping policy would eliminate federal income taxes on tips, it’s important to note that some states may still impose their own income taxes on tip income. Additionally, it is unclear whether payroll taxes, such as Social Security and Medicare contributions, would be affected by the plan. Workers and employers should review both federal and state tax regulations to fully understand their responsibilities regarding tipped earnings.

In an industry facing fierce competition for talent, high turnover, and the challenge of maintaining consistently high service quality, making tipping tax-free could present a new way to attract, motivate, and retain top-notch technicians.

How Tips Are Taxed Today

Under current federal law, tips are treated as taxable income, meaning they’re subject to both income and payroll taxes. Workers who earn more than $20 a month in tips are required to report them to their employer, who withholds payroll taxes—7.65% of earned income for Social Security and Medicare—and federal income tax, which ranges from 10% to 37% depending on the worker’s tax bracket.

While Trump’s proposal to eliminate federal income tax on tips wouldn’t necessarily remove the payroll tax burden from employees and employers, it would allow workers to keep significantly more of their earnings by eliminating federal income tax on their tips.

Why Tax-Free Tips Could Be a Game Changer

Trump’s proposal to eliminate federal income taxes on tips could transform tipping from a nice-to-have to a powerful tool for career growth and retention in home services in industries like pest control, HVAC, electrical, plumbing, and lawn care. Here’s how this policy shift could make an impact:

1. Higher Take-Home Pay Without Raising Costs

With income tax-free tips, technicians could keep more of every dollar they earn in gratuities—providing a meaningful income boost without raising base wages or increasing payroll taxes for employers. For technicians, this means greater financial stability and reward for their hard work. For businesses, it’s a way to elevate compensation and keep employees satisfied.

2. Attracting Top Talent to Home Services

A federal income tax-free tipping policy could set home services jobs apart in a competitive labor market, making these positions more attractive to skilled professionals. For technicians working in pest control, plumbing, electrical, HVAC, or lawn care, where technical expertise and customer satisfaction are key, the opportunity to earn untaxed tips could make these roles even more appealing.

3. Motivating Excellence and Boosting Service Quality

When technicians know they have the opportunity to earn extra income for exceptional service, it raises the bar for quality across the industry. Whether it’s a pest control company providing thorough treatments, a lawn care professional delivering pristine landscaping, or an HVAC specialist restoring comfort to a family home, this drive for excellence creates a cycle of satisfaction: customers receive great service, technicians feel appreciated and motivated, and businesses benefit from stronger customer loyalty, more referrals, and a growing reputation.

Why Tipping Matters in Home Services

Unlike other sectors where tipping might feel like a courtesy or expectation, tipping in home services is a direct and genuine form of customer appreciation. When a customer tips a technician, they’re recognizing not only the quality of the work but the technician’s effort, attention to detail, and respect for the customer’s personal space. It’s an acknowledgment that goes beyond wages, building a stronger bond between customer and technician and reinforcing the value of the technician’s role.

Customers often tip for a few key reasons: 

• Extra Effort and Dedication: Technicians frequently go above and beyond to meet customer needs, whether it’s handling an emergency repair on short notice or tackling a particularly challenging job. For instance, a plumber fixing a burst pipe at night or a pest control technician handling a last-minute infestation demonstrates the kind of dedication customers are willing to reward.
  
  

• Visible, Lasting Results: In home services, the quality of a technician’s work is often immediately noticeable and has a lasting impact on the customer’s home environment. From a beautifully maintained lawn to a thoroughly cleaned house, a technician’s skill and attention to detail shine through, and customers tip is a way to express their appreciation for high-caliber service.
  
  

• Trust and Professionalism: Consumers expect a high level of trust and respect when technicians are working in or around their homes. This is especially important for plumbers, pest control technicians, electricians, and HVAC repair specialists, where reliability and professionalism are essential.

How Applause Supports Tipping to Drive Retention and Performance

For industries like pest control, HVAC, lawn care, plumbing, and electrical, Applause helps companies not only improve technician retention but also build a reputation for rewarding outstanding service.

Applause’s platform offers home services companies a seamless way to implement tipping, directly linking customers’ appreciation with technicians. With a simple, user-friendly tipping feature, Applause makes it easy for customers to reward exceptional service on the spot, creating a more immediate and impactful experience for everyone involved.

Immediate Feedback and Motivation

Applause enables technicians to receive instant tips and feedback from customers, reinforcing positive behaviors and encouraging excellence on every job.

Greater Financial Flexibility for Service Workers

Through Applause, technicians can receive tips that are immediate and meaningful, giving techs greater financial flexibility and security. For technicians, this is a unique opportunity to earn more in a way that feels directly tied to their performance, creating a stronger sense of ownership and pride in their work.

Strengthening Company Reputation

By enabling tipping through Applause, businesses build a reputation for valuing and rewarding their employees. This transparency in rewarding hard work is appealing to customers and also attracts high-quality talent, creating a positive cycle where customers, employees, and the business all benefit.

Could Tax-Free Tips Positively Impact Home Services?

As the home services industry adapts to changing customer expectations and a competitive labor market, tipping represents a powerful way to enhance technician compensation, job satisfaction, and loyalty. Trump’s proposed policy to eliminate federal income taxes on tips has the potential to make tipping a central part of technician earnings, creating a new incentive for talented individuals to join and stay in the industry.

Allowing tipping—and leveraging it as a tax-free benefit—could pave the way for a stronger, more motivated workforce, where technicians feel empowered to deliver exceptional service and customers feel confident in the value they receive. With platforms like Applause, tipping becomes an easy, effective way to support both employee satisfaction and business growth, making it a strategic advantage in the home services industry.

While this is still just a proposal and not an official law, it does bring up an interesting conversation about how important tips can be to employees, including home service workers. With the cost of living constantly on the rise, we’re all looking for that bump in pay to give us a better cushion – tips are one way to do that. Like you, we will be keeping an eye on the conversation.