Diners are still coming in. But they are tipping less. Not out of rudeness. Out of strain. Square data shows the average tip at sit-down restaurants dropped to 14.99% in Q2 2025. That is down from 15.4% in 2024. Toast reported a drop from 19.6% to 19.3%. That is the lowest in six years across the venues it tracks.
The dip has nothing to do with service volume. It follows sticker shock. Menu prices have jumped 4.6% since January. In places like Los Angeles, New York, and Dallas, dinner now runs between $42 and $58 per person before drinks. The higher the bill, the smaller the percentage. Math stays the same. Human behavior does not.
Confusion over the No Tax on Tips Act made things worse. Signed into law on July 4, the bill lets tipped workers deduct up to $25,000 in tip income from their federal return. But the catch is clear. Only those who pay federal income tax benefit. Treasury data shows nearly 38% of tipped workers paid none in 2022. The median wage for restaurant servers is $31,940. Most never qualify for the full deduction.
Still, the message got twisted. Customers heard about the new law and assumed servers were getting more. So they tipped less. Bartenders in Orlando said regulars dropped from 20% to flat tips. Servers in Brooklyn reported diners refusing the 25% tablet prompt saying “Trump already gave you a break.” In Arizona, waitstaff were asked if tips were still needed now that “Congress passed the refund.”
But there is no refund. Not automatically. The IRS requires workers to document their role. Employers must verify it. State taxes still apply. Payroll deductions are unchanged. The benefit phases out at $150,000 in income for individuals. Almost no one in tipped roles comes close. Yet public perception changed anyway.
Tipping behavior is not fixed. It bends to policy. It bends to price tags. It bends to media. A June 2025 Bankrate survey shows 41% of Americans think tipping culture is excessive. That is a six-point jump from last year. A Reddit thread on r/EndTipping spelled it out. “Overpriced meals, underpaid staff, and we’re the ones guilted into covering the gap.”
Restaurants are not blind to the shift. Many now set default tips at 18%. Some dropped the screens altogether. Drive-thrus are experimenting with fixed wage setups. But tip volume is sliding fast. Fast casual chains saw a 12.3% decline. Full-service restaurants reported a 7.1% drop. Third-party delivery tips fell 9.5%.
Workers feel it first. Fewer tables. Smaller checks. No cushion. Tax-free tips did not boost take-home pay. They just flattened it.
Sources
https://www.bankrate.com/finance/credit-cards/americans-tipping-less-survey/
https://squareup.com/us/en/press/tipping-2025-q2-data
https://toasttab.com/blog/tipping-trends-report-2025
https://www.irs.gov/newsroom/federal-income-tax-deductions-on-tip-income-explained
