Quick answer. For tax years 2025 through 2028 you can deduct up to $25,000 of qualified tips. The amount shrinks by $100 for each full $1,000 of modified AGI over $150,000 ($300,000 married filing jointly). Example: $18,000 of tips and modified AGI of $163,500 gives an estimate of $16,700.
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The rule, as the IRS states it
- Years: 2025 through 2028.
- Limit: $25,000 a year per return, the same for single and joint filers.
- Phase-out: starts above $150,000 of modified AGI, or $300,000 married filing jointly. Schedule 1-A (2025), lines 8 to 13, takes $100 off for each full $1,000 over that line and rounds any fraction down.
- Occupation: only tips received in an occupation that customarily and regularly received tips on or before December 31, 2024, as listed by the IRS.
- Qualified tips: paid in cash or the equivalent (check, card, gift card, app), voluntarily and without negotiation, including tips shared through a tip pool. Service charges the customer can't disregard or change don't count (IR-2026-49).
- Reporting: the tips must be on a Form W-2, 1099 or other statement, or reported by you on Form 4137. For 2026 and later, Form W-2 uses box 12 code TP for cash tips reported to the employer and box 14b for the occupation code (2026 W-2 instructions).
- Other conditions: a Social Security number on the return, a joint return if married, a limit of net income from the business for the self-employed, and no deduction for tips in a specified service trade or business (SSTB) or from an SSTB employer.
For 2025, when employers did not report tips separately, the IRS examples in IR-2025-114 let an employee use the social security tips in W-2 box 7 or the tips reported to the employer, plus tips on Form 4137, and accepted a self-employed tour guide's daily tip log.
The eight groups on the IRS list
The IRS list has 71 occupations in eight groups: beverage and food service (10), entertainment and events (11), hospitality and guest services (4), home services (9), personal services (10), personal appearance and wellness (11), recreation and instruction (6), transportation and delivery (10). Codes run from 101 (bartenders) to 810 (gas pump attendant). The menu in the calculator copies that list as it stood on June 28, 2026. Check the IRS page before relying on a code.
Sources
- IRS: One, Big, Beautiful Bill provisions, individuals and workers (updated Aug. 27, 2026)
- IRS: Schedule 1-A (Form 1040), Additional Deductions, 2025
- IRS: Occupations that customarily and regularly received tips on or before Dec. 31, 2024
- IRS IR-2026-49: final regulations listing tipped occupations and defining qualified tips (April 10, 2026)
- IRS IR-2025-114: guidance for individuals who received tips or overtime in 2025 (Notice 2025-69)
- IRS: General Instructions for Forms W-2 and W-3 (2026)
- IRS: Form 1040 instructions, including Schedule 1-A
General information checked November 2026 against the IRS sources above. It is not tax advice, and it does not tell you whether you qualify: your return, your forms and your preparer decide that. MCC Solutions is not a CPA firm and is not affiliated with the IRS. Self-employed tips and SSTB questions are ones for your preparer. The calculator runs in your browser, and nothing you enter is sent or saved.
Common questions
Which years does the tips deduction cover?
Tax years 2025, 2026, 2027 and 2028. The IRS lists it as a temporary deduction under the One, Big, Beautiful Bill, claimed on Schedule 1-A of Form 1040.
Do I have to itemize to deduct tips?
No. The IRS says the deduction is available whether you take the standard deduction or itemize.
Is my job on the list of tipped occupations?
The IRS publishes the list with a three-digit Treasury Tipped Occupation Code for each of 71 occupations, from bartenders to gas pump attendants. Compare what you actually do with the descriptions on the IRS page. Starting with 2026 forms, employers show the code in box 14b of Form W-2.
Does an automatic service charge count as a tip?
Generally no. The final regulations say a charge the customer cannot disregard or change, such as an automatic 18% charge for a large party, is not a qualified tip, even when it is passed on to staff.
How is the phase-out worked out?
On the 2025 Schedule 1-A, you subtract $150,000 ($300,000 if married filing jointly) from modified AGI, divide by $1,000, drop any fraction and multiply by $100. That amount comes off the smaller of your tips or $25,000.
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