2025 TAX LAW · Up to $25,000 in tips, deductible from your federal taxes.
What the new tip tax break means for you
In 2025, Congress passed a new federal deduction for tip income. If you work in a tipped job, you may be able to deduct a large share of your tips from your federal income taxes — and TopTipper already keeps the record you’ll need to claim it.
The basics
- Deduct up to $25,000 in tips per year from your federal income taxes.
- Available 2025 through 2028. It’s a temporary break, so it matters most over the next few years.
- You don’t have to itemize. The deduction works whether you take the standard deduction or not.
- Most tipped roles qualify — including car wash and detailing crews, valets, and hospitality and food-service staff. (The IRS publishes the official list of eligible occupations.)
- The tip has to be voluntary — left by the customer, not an automatic service charge.
- Higher earners phase out. The deduction starts shrinking once income passes $150,000 (or $300,000 for couples filing jointly).
Where TopTipper comes in
The hardest part of claiming this used to be proving what you earned. Cash tips are easy to lose track of. Every tip that comes through TopTipper is recorded the moment it’s paid — date, amount, all of it — so when tax time arrives, your full tip history is one export away. No shoebox of notes, no guessing.
A quick example
Say you earn $30,000 in tips in a year:
- Tip income: $30,000
- Deduction (capped at $25,000): –$25,000
- Tips still taxed: $5,000
- Roughly $5,500 less in federal income tax (at a 22% rate)
Keep in mind
- Tips still count as income — you report them, then claim the deduction when you file (Form 1040).
- This is a federal income tax break. You still owe Social Security and Medicare on tips, and your state may still tax them — though states with no income tax (like Texas, Florida, Tennessee, Nevada, and Washington) don’t.
- Everyone’s situation is different. This is general info, not tax advice — check with a tax professional about your own return.