No Tax on Tips

Are you a server, hair stylist, or other service provider that receives tips? Good news, the One Big Beautiful Bill Act allows you to deduct up to $25,000 in qualified tip income!

To be considered qualified tip income, it must meet the following criteria:

• Voluntary, not compelled

• Determined by the customer

• Not subject to negotiation or dictated by employer policy

• Customer decides who receives tips

• Properly reported on IRS forms (W2, 1099, etc.)

• Earned in occupations listed by the IRS as customarily tipped as of 12/31/2024. The IRS' prelim list has 68 jobs; some examples are listed below:

  • Beverage and food and service

  • Entertainment and events

  • Hospitality and guest services

  • Home services

  • Personal services

The qualified tip deduction is reduced by $100 for every $1,000 of MAGI exceeding $150,000 for single filers or $300,000 for joint filers.

Tip income is still subject to payroll and state taxes.

The qualified tip income deduction is available for tax years 2025 to 2028.