Maximize Your Tax Savings: How Tipped Workers Can Claim Up to $25,000

Starting with tax year 2025, there’s good news for workers who earn tips: the IRS now allows a federal income tax deduction of up to $25,000 for qualified tips.

This deduction applies through 2028 and could significantly reduce taxable income for many service industry professionals.

What Counts as a Qualified Tip?

• Included: Money received from customers in cash, by credit card, or through a tip-sharing arrangement—as long as it’s voluntary.

• Excluded: Mandatory gratuities or service charges added by the business.

Who Can Claim It?

• Available to both itemizing and non-itemizing taxpayers

• However, the deduction phases out for higher-income earners:

  • Single filers: MAGI over $150,000

  • Joint filers: MAGI over $300,000

Want to Know If Your Job Qualifies?

The U.S. Department of the Treasury provides a detailed list of occupations that customarily receive tips.