{"id":20657,"date":"2025-08-19T08:00:00","date_gmt":"2025-08-19T13:00:00","guid":{"rendered":"https:\/\/resource-center.hrblock.com\/"},"modified":"2025-08-19T16:09:34","modified_gmt":"2025-08-19T21:09:34","slug":"reporting-tip-income","status":"publish","type":"post","link":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/wages\/reporting-tip-income\/","title":{"rendered":"No Tax on Tips: What tipped workers need to know now about reporting tip income"},"content":{"rendered":"\n

Tips and taxes have been part of the tax code for ages. Now, with the One Big Beautiful Bill<\/a> going into effect, there are big changes in store for 2025 returns that affect just how much of your tips are taxed.<\/p>\n\n\n\n

You probably have lots of questions about what this means for you\u2014including what you should be doing now if you\u2019re a tipped worker.<\/a><\/p>\n\n\n

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\"Waitress<\/figure><\/div>\n\n\n

Here\u2019s the good news: H&R Block has answers. And, at tax time, we\u2019ll be right by your side so you can claim all the tax benefits you qualify for.<\/p>\n\n\n\n

\u201cNo Tax on Tips\u201d bill: Key changes<\/h2>\n\n\n\n

As part of the 2025 reconciliation bill, you may have heard about No Tax on Tips. This new rule allows certain workers to deduct up to $25,000 in tips from their income. Some of the details are still being finalized, but we\u2019ll update our information as we learn more.<\/p>\n\n\n\n

One big thing to note<\/strong>: While it\u2019s referred to as \u201cNo Tax on Tips,\u201d it doesn\u2019t mean tips are entirely tax-free. In other words, the new rule provides a tax break, but not a complete exemption from taxes on tips. In this post, we\u2019ll use this informal name, but you\u2019ll want to keep the deduction limit in mind.<\/p>\n\n\n\n

What is No Tax on Tips? <\/h2>\n\n\n\n

So, what does \u201cno tax on tips\u201d mean in a real-world setting?  It means eligible workers can deduct a portion of their tip income from federal income tax, but other taxes like Social Security and Medicare (called FICA tax<\/a>) still apply.<\/p>\n\n\n\n

Read on to find out how this new rule could impact you. <\/p>\n\n\n\n

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How will the One Big Beautiful Bill Act affect you?<\/h2>\n\n\n\n

Check out a breakdown of key changes from the One Big Beautiful Bill Act (OBBBA).<\/p>\n\n\n\n

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Review OBBBA tax reform changes<\/a><\/div>\n<\/div>\n<\/div>
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How much of my tips are tax free?<\/h2>\n\n\n\n

Under the new law, you can deduct up to $25,000 of tip income annually from your federal income taxes. When you file, you won\u2019t have to pay income taxes on any qualified tips.<\/p>\n\n\n\n

When will No Tax on Tips start?<\/h2>\n\n\n\n

No Tax on Tips goes into effect starting with the 2025 tax year. That means you can apply the deduction to qualified tips starting January 1, 2025.<\/p>\n\n\n\n

Who qualifies for the No Tax on Tips deduction?<\/h2>\n\n\n\n

Not every person who receives tips will be able to take the deduction. To qualify, you must work in an occupation where tipping is customary.<\/p>\n\n\n\n

So, which ones are those?  The exact answer is coming soon. The Treasury Department will release a list of eligible occupations within 90 days of the bill\u2019s passage.<\/p>\n\n\n\n

Aside from your occupation, you can claim this benefit whether you itemize or take the standard deduction<\/a>.<\/p>\n\n\n\n

What tips count for the deduction?<\/h3>\n\n\n\n

Tips received in cash, via credit card, debit card, and through tip-sharing arrangements all count toward the deduction.<\/p>\n\n\n\n

Who doesn\u2019t qualify for the No Tax on Tips deduction?<\/h2>\n\n\n\n

Even if you happen to be in one of the eligible occupations, there\u2019s a chance you may not qualify if your income is on the higher end. The deduction begins to phase out if your income reaches $150,000 ($300,000 for joint filers).<\/p>\n\n\n\n

Are there income limits for the No Tax on Tips deduction?<\/h2>\n\n\n\n

Yes, the deduction begins to phase out for individuals with a higher modified adjusted gross income. In other words, you may only get to take a portion of the deduction.  <\/p>\n\n\n\n

Specifically, the deduction starts to phase out at:<\/p>\n\n\n\n