Who qualifies
The deduction covers voluntary cash or card tips in jobs where workers customarily received tips before 2025, such as wait staff, bartenders, salon workers, personal trainers, and many gig workers. Treasury publishes the list of eligible occupations. Mandatory service charges added to a bill don't count.
| Rule | Amount |
|---|---|
| Maximum deduction | $25,000 per return |
| Phase-out starts at MAGI | $150,000 ($300,000 joint) |
| Reduction | $100 for each $1,000 over |
| Married filing separately | Not eligible |
You can claim it whether you itemize or take the standard deduction. You need a valid Social Security number, and self-employed workers can't deduct more than their net income from the work that earned the tips. Tips earned in certain professional service businesses, such as health, law, and consulting, don't qualify. Source: IRS guidance on the One Big Beautiful Bill Act.
What it doesn't change
The deduction lowers federal income tax only. Your employer still withholds 7.65% for Social Security and Medicare on reported tips, and your state may still tax them. Report all your tips to your employer: tips you don't report can't be deducted.
Frequently asked questions
Is the $25,000 per person?
It's per tax return. A married couple filing jointly has one $25,000 limit between them.
Do I need to itemize?
No. You can take the tip deduction along with the standard deduction.
When does it end?
It applies to tax years 2025 through 2028 unless Congress extends it.