09/07/2026
Good afternoon fb!!!
Today’s tax topic is: No Taxes on Tips
The One Big Beautiful Bill Act (OBBA) was signed into law on July 4, 2025. This law introduced a mixture of temporary and permanent tax breaks and extensions, one being the No Tax on Tips.
The No Tax On Tips is a federal tax deduction of up to $25,000 per year on qualified tipped income. It is NOT a complete tax exemption!!!
How the deduction works
•Still taxable and reported - All tips must be reported to your employer. Your employer will still take out federal income taxes and other taxes from your paycheck throughout the year. When filling your federal income tax return, you can claim the deduction and lower your income tax and possibly increase any due refund
•Other taxes - You will still pay other payroll taxes such as Social Security and Medicare.
• Tax Reduction- This is an above the line deduction meaning if you are an eligibility tax payer you can claim this deduction whether you take the standard deduction or itemized your deductions.
Eligibility
Qualifying occupations such as ones where tips are voluntary whether the tips are cash, credit or charged can take the deduction. These occupations include restaurant servers and bartenders, salon workers, gig workers and ect.
Income Phase Out
The deduction beings to phase out once your filing status reaches a certain Modified Adjusted Gross Income (MAGI). The income phase out for single filers is $150,000 and married filing jointly is $300,00. Married filing separately can not take the deduction.
As of now this is a temporary deduction and applies to tax years 2025 through 2028.
Feel free to reach out with any questions!!! I’m always available and happy to help
513 399 7509