How the tips tax deduction works
For tax years 2025 through 2028, tipped workers can deduct up to $25,000 of qualified tips from federal taxable income, whether or not they itemize. Qualified tips are voluntary cash or charged tips from customers, in an occupation on the IRS list of customarily tipped jobs. Mandatory service charges are wages, not tips, and never qualify.
Income limits and who qualifies
The deduction phases out above $150,000 MAGI ($300,000 joint), by $100 per full $1,000 over the threshold. Self-employed workers cannot deduct more than the net income of the tipped business, and workers in a Specified Service Trade or Business (SSTB) are excluded. Married taxpayers must file jointly.
Which occupations qualify (the official IRS list)
The IRS final regulations, effective June 12, 2026, define the "List of Occupations that Receive Tips" using Treasury Tipped Occupation Codes (TTOC), grouped into 8 categories:
- Beverage & Food Service — bartenders, wait staff, chefs and cooks, bakers, dishwashers, and more
- Entertainment & Events — gambling dealers, dancers, musicians, DJs, entertainers, digital content creators
- Hospitality & Guest Services — bellhops, concierges, hotel desk clerks, housekeeping
- Home Services — electricians, plumbers, HVAC techs, home cleaners, locksmiths, roadside assistance
- Personal Services — event planners, photographers, tutors, nannies, and (added in the final rule) visual artists and floral designers
- Personal Appearance & Wellness — massage therapists, hairstylists, manicurists, makeup artists, tattoo artists, personal trainers
- Recreation & Instruction — golf caddies, tour guides, ski and dive instructors, tour pilots
- Transportation & Delivery — taxi/rideshare drivers, delivery couriers, valets, movers, and (added in the final rule) gas pump attendants
Use the occupation checker above to search all 71 listed jobs. If your job is not on the list, tips you receive are not qualified tips for this deduction, even if the other requirements (voluntary, cash-equivalent, correctly reported) are met.
How this calculator works
Annual tips = weekly tips × weeks. The tool caps this at $25,000, applies the self-employed net-income limit if selected, subtracts the MAGI phase-out ($100 per full $1,000 over $150,000 / $300,000, rounded down), and multiplies by your bracket. FICA and state taxes still apply to tips.