Income tax relief and deductions: No tax on tips

Written By Dawn Priebe

Effective for 2025 through 2028, employees and self-employed individuals may deduct qualified tips received in occupations listed by the IRS as customarily and regularly receiving tips on or before December 31, 2024, and that are reported on a Form W-2, Form 1099, or other specified statement furnished to the individual or reported directly by the individual on Form 4137.

  • “Qualified tips” are voluntary cash or charged tips received from customers or through tip sharing

  • Maximum annual deduction is $25,000; for self-employed, deduction may not exceed individual’s net income (without regard to this deduction) from the trade or business in which the tips were earned.

  • Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers)

Dawn Priebe
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