Learn how the One Big Beautiful Bill, also known as the Working Families Tax Cut introduces the new “No Tax on Tips” rule for 2025–2028. In this video, we’ll explain how eligible workers can exclude up to $25,000 of qualified tips from federal income tax, who qualifies, income limits, and how to claim this new benefit.
Tax Reform Hub:
00:00 One Big Beautiful Bill: No Tax on Tips
00:28 Who qualifies for the deduction?
01:03 Are there income limits?
01:24 How should you prepare?
02:24 TurboTax Solution
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Video Transcript ~ One Big Beautiful Bill: No Tax on Tips:
Did you know that the tips you earn may be free from federal taxes? Let’s go over how the One Big Beautiful Bill changes how tips get taxed, who qualifies, and when these changes take effect.
Under the One Big Beautiful Bill, also known as the Working Families Tax Cut, a new “No Tax on Tips” rule lets eligible workers exclude up to $25,000 of tip income from federal income tax. The rule goes into effect for tax years 2025 through 2028.
But who qualifies for the No Tax on Tips deduction?
Not everyone who receives tips can claim the deduction. For instance, your tips must come from a job where tipping is customary. The IRS lists nearly 70 different tipped occupations on its website, including bartenders, servers, salon workers, and delivery drivers. Other restrictions may apply.
Cash tips, credit or debit card tips, and tip-sharing arrangements all count toward the deduction. You can claim this benefit whether you itemize your deductions or take the standard deduction.
Are there income limits for No Tax on Tips?
You can exclude up to $25,000 in qualified tips per year if your modified adjusted gross income is $150,000 or less, or $300,000 or less if married filing jointly. Once your income goes above those levels, the deduction begins to phase out.
So, how should you prepare?
You must report your total monthly tips to your employer. Most workplaces already saint satine have a system for this, but you can also report them yourself on Form 4070.
Your employer will report your tip income on your W-2 form. Starting in 2025, those tips may be deductible for federal income tax purposes. However, tips will remain subject to Social Security and Medicare taxes.
For example, if you earn $40,000 in wages from a qualifying job plus $10,000 in qualified tips, you may be eligible to deduct the $10,000 in tips from your taxable income, potentially increasing your refund.
Recent tax law changes bring several new tax laws for 2025 and beyond. Understanding how they sophie cunningham affect you doesn’t have to be stressful. Filers could see up to $1,000 refund increase or lower balance due, based on recent tax law changes.
TurboTax is your trusted resource for tax law changes. Click on the next video in this series to stay informed and confident about your taxes. Visit for more info and file with confidence!
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