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Tips and taxes

Do you have to report tips to the IRS?

Sourced answer
Yes. Cash, card, and digital tips generally must be reported as income. Eligible U.S. workers may qualify for a federal income tax deduction of up to $25,000 in qualified tips annually for tax years 2025 through 2028. Social Security, Medicare, and other applicable taxes may still apply.

Based on: Internal Revenue Service

The numbers that matter

  • Deduction cap

    Up to $25,000

    How much is the “No Tax on Tips” deduction?

  • Income phase-out

    $150,000

    Is there an income limit on the tips deduction?

  • Tax years

    2025–2028

    Which years does the tips deduction cover?

  • Employer reporting

    $20 a month

    How much in tips before I have to report them to my employer?

  • Information reporting (payment apps)

    $20,000 and 200 payments

    When does a payment app send a Form 1099-K?

  • Still applies

    Income tax only

    Are tips free of all tax now?

These are different kinds of lines. The cap, phase-out and tax years set how much you can deduct. The $20 a month decides when an employee tells the employer. The Form 1099-K numbers only decide when a payment app sends an information return; they don’t decide whether tips are taxable.

From tip to tax return, in three steps

  1. Step 1

    You get a tip

    Cash, card or app, any amount. It's income.

  2. Step 2

    File your return

    Tips go on it with the rest of your income.

  3. Step 3

    Check the deduction

    If you're eligible, deduct up to $25,000 of qualified tips from taxable income.

The “No Tax on Tips” deduction

This is the big relief. Workers in jobs on the Treasury list can deduct up to $25,000 of tips a year from federal income tax, for 2025 through 2028. It doesn't make tips tax-free (Social Security and Medicare still apply), and it has to be claimed.

No Tax on Tips

Tax year 2026

Estimate your potential deduction

Tax year

You earn tips as

Is your job on the Treasury list of tipped occupations?

Filing status

Valid Social Security number

$12,000
$60,000

Estimated potential deduction

$12,000of $25,000 cap

The full amount, under the cap.

Illustrative, not a determination of eligibility. The same cap, phase-out and requirements apply in 2025 and 2026.

It counts only qualified tips: voluntary cash or card tips the customer chose, not mandatory service charges, reported on a W-2, a 1099 or Form 4137. It is a deduction, not a credit: it lowers your taxable income, so the tax you save depends on your bracket. It doesn’t reduce Social Security or Medicare tax. Not tax advice.

When it applies

Four tax years: 2025 to 2028

  1. –
    2024
  2. 2025
  3. 2026
  4. 2027
  5. 2028
  6. –
    2029

Claimed each year on Schedule 1-A with your Form 1040, from your 2025 return through your 2028 return.

Treasury list

Which jobs are on the list?

71 occupations in 8 groups. Open a group to find your job.

Beverage and food service10
  • 101BartendersBarkeep, mixologist, sommelier
  • 102Wait staffCocktail server, banquet staff
  • 103Food or beverage servers, non-restaurantRoom service server, beer cart server
  • 104Dining room and cafeteria attendants and bartender helpersBar back, busser
  • 105Chefs and cooksPrivate chef, food truck cook, caterer
  • 106Food preparation workersSalad maker, sandwich maker
  • 107Fast food and counter workersBarista, ice cream server
  • 108DishwashersDish room worker
  • 109Host staff, restaurant, lounge, and coffee shopMaître d', dining room host
  • 110BakersBread baker, cake baker
Entertainment and events11
  • 201Gambling dealersBlackjack dealer, poker dealer
  • 202Gambling change persons and booth cashiersSlot attendant, mutuel teller
  • 203Gambling cage workersCasino cashier, cage cashier
  • 204Gambling and sports book writers and runnersKeno runner, race book writer
  • 205DancersClub dancer, dance artist
  • 206Musicians and singersLounge singer, accompanist
  • 207Disc jockeys, except radioClub DJ
  • 208Entertainers and performersComedian, magician, street performer
  • 209Digital content creatorsStreamer, podcaster
  • 210Ushers, lobby attendants, and ticket takersTheater usher, ticket collector
  • 211Locker room, coatroom, and dressing room attendantsCoat checker, washroom attendant
Hospitality and guest services4
  • 301Baggage porters and bellhopsHotel baggage handler, curbside airport check-in, doorman
  • 302ConciergesHotel guest service agent, activities concierge
  • 303Hotel, motel, and resort desk clerksFront desk clerk, registration clerk
  • 304Maids and housekeeping cleanersHotel maid, housekeeping staff
Home services9
  • 401Home maintenance and repair workersHandyman, house painter, piano tuner
  • 402Home landscaping and groundskeeping workersGardener, tree trimmer
  • 403Home electriciansElectrician
  • 404Home plumbersPlumber, sprinkler installer
  • 405Home heating and air conditioning mechanics and installersAC repairer, chimney sweep
  • 406Home appliance installers and repairersWashing machine installer
  • 407Home cleaning service workersHouse cleaner, pool cleaner, window washer
  • 408LocksmithsKey maker, safe installer
  • 409Roadside assistance workersTow truck driver, tire changer
Personal services10
  • 501Personal care and service workersPersonal care aide, house sitter
  • 502Private event plannersWedding planner, party planner
  • 503Private event and portrait photographersWedding photographer
  • 504Private event videographersWedding videographer
  • 505Event officiantsWedding officiant, funeral celebrant
  • 506Pet and show animal caretakersPet groomer, pet sitter, pet walker
  • 507TutorsMath tutor, language tutor
  • 508Nannies and babysittersAu pair, child sitter
  • 509Visual artistsIce sculptor, caricature artist
  • 510Floral designersFlorist, event florist
Personal appearance and wellness11
  • 601Skincare specialistsFacialist, spa esthetician
  • 602Massage therapistsSports massage therapist
  • 603Barbers, hairdressers, hairstylists, and cosmetologistsHair colorist, beautician
  • 604ShampooersShampoo assistant
  • 605Manicurists and pedicuristsNail technician
  • 606Eyebrow and eyelash techniciansEyebrow waxer
  • 607Makeup artistsWedding makeup artist
  • 608Exercise trainers and group fitness instructorsPersonal trainer, yoga instructor
  • 609Tattoo artists and piercersTattoo artist, ear piercer
  • 610TailorsSeamstress, alterations worker
  • 611Shoe and leather workers and repairersCobbler, shoe shiner
Recreation and instruction6
  • 701Golf caddiesGolf caddie, golf cart attendant
  • 702Self-enrichment teachersPiano teacher, art instructor
  • 703Recreational and tour pilotsHelicopter tour pilot, balloon pilot
  • 704Tour guidesMuseum guide, sightseeing guide
  • 705Travel guidesCruise director, expedition guide
  • 706Sports and recreation instructorsSki instructor, surfing instructor
Transportation and delivery10
  • 801Parking and valet attendantsValet parker, garage attendant
  • 802Taxi and rideshare drivers and chauffeursCab driver, app-based rideshare driver
  • 803Shuttle driversAirport shuttle, hotel shuttle
  • 804Goods delivery peoplePizza, grocery and app-based delivery
  • 805Personal vehicle and equipment cleanersCar wash attendant, auto detailer
  • 806Private and charter bus driversTour bus driver
  • 807Water taxi operators and charter boat workersWater taxi captain, charter deckhand
  • 808Rickshaw, pedicab, and carriage driversPedicab driver, carriage driver
  • 809Home moversFurniture mover, piano mover
  • 810Gas pump attendantsGas pumper
IRS — Occupations that customarily and regularly received tips on or before Dec. 31, 2024 (Treasury Tipped Occupation Codes)

If you work for yourself

Dog walkers, independent stylists, drivers and other self-employed workers have no employer to report to. Tips are part of business income. Whether you get a Form 1099-K depends on how you were paid: card payments processed for you have no minimum, and payment apps report past $20,000 and 200 payments. The income goes on your return either way.

Form 1099-K

The reporting rule depends on how you were paid

Payment type

$6,000
80

Under the federal threshold, the app doesn't have to send a Form 1099-K (it still may, and some states set lower thresholds). Either way, the income goes on your tax return.

This threshold is for third party network transactions: payments for goods or services through payment apps and online marketplaces, more than $20,000 and more than 200 transactions in a calendar year.

Which rule covers a particular app or service depends on how its payments are processed. A Form 1099-K reports payments; it doesn’t decide whether income is taxable.

  • When does a payment app send a Form 1099-K?

    Payment apps and online marketplaces (third party network transactions) must send a Form 1099-K when payments for goods or services top $20,000 across more than 200 transactions in a year. Card payments processed for you are a separate rule with no minimum: the card processor reports them whatever the amount.

    IRS — Understanding your Form 1099-K

  • Is there a minimum for card payments on Form 1099-K?

    Payment card transactions have no federal reporting threshold: if you accept card payments, the processor reports them on Form 1099-K no matter how many there were or how small.

    IRS — Form 1099-K FAQs (third party network vs. payment card transactions)

  • No 1099-K means no tax?

    A Form 1099-K is an information return, not a tax bill. Whether or not you get one, you still report your income on your tax return.

    IRS — Understanding your Form 1099-K

  • Can self-employed workers take the tips deduction?

    Self-employed workers can claim it, but the deduction can't exceed the net income of the business where the tips were earned.

    IRS — What the “No Tax on Tips” deduction means for you

If you're an employee

Servers, bartenders, hotel staff and salon employees tell their employer about tips, and the employer adds them to payroll. The $20 line is per month and per job: below it you skip the employer report, but the tips still go on your tax return.

For employees

Tips from one job this month

$12
$20 line

Under $20: no report to your employer this month. They're still income, so they go on your tax return.

  • How much in tips before I have to report them to my employer?

    Employees must report cash and card tips to their employer when they total $20 or more in a month from one job. Tips under $20 in a month aren't reported to the employer, but they are still income.

    IRS Publication 531, Reporting Tip Income

  • When are tips reported to the employer?

    Each month's tips are reported to the employer by the 10th of the next month, or the next business day if the 10th is a weekend or holiday.

    IRS Publication 531, Reporting Tip Income

  • What if I didn't report tips to my employer?

    Social Security and Medicare tax on tips of $20 or more a month that weren't reported to the employer is figured on Form 4137 with your tax return. A penalty can apply.

    IRS Publication 531, Reporting Tip Income

  • Are non-cash tips taxable?

    Non-cash tips, such as tickets or passes, are taxable income reported on your return, but not to your employer.

    IRS Publication 531, Reporting Tip Income

  • What are allocated tips?

    At larger restaurants and bars, if reported tips fall below 8% of food and drink sales, the employer may allocate the difference to employees; it appears in box 8 of the W-2.

    IRS Publication 531, Reporting Tip Income

  • Do reported tips count toward Social Security?

    Tips you report to your employer go on your earnings record, which affects your Social Security benefits when you retire or if you become disabled.

    IRS Publication 531, Reporting Tip Income

  • Which tips count as wages for Social Security?

    Cash tips of $20 or more in a calendar month from one employer count as wages for Social Security.

    SSA POMS RS 01402.280, Cash tips

  • Do tips count as income for a mortgage?

    They can. Fannie Mae recommends a two-year history of tip income, shown with a recent paystub and two years of W-2s, or with tax returns and Form 4137 for tips that weren't reported to an employer.

    Fannie Mae Selling Guide B3-3.3-02, Bonus, Commission, Overtime, and Tip Income

Does your state tax tips?

States tax tips the same way they tax wages. In five of the states where tippos is available there is no state income tax at all. Elsewhere, rates run from 2.5% to 13.3% at the top, and most people pay less than the top rate. Whether a state also follows the federal tips deduction is decided state by state, so check with your state’s tax department.

No state income tax (5) One flat rate Rates rise with income (top rate shown)
  • ArizonaAZ

    2.5%flat

  • CaliforniaCA

    13.3%top

  • ColoradoCO

    4.4%flat

  • HawaiiHI

    11%top

  • IndianaIN

    2.95%flat

  • IowaIA

    3.8%flat

  • KansasKS

    5.58%top

  • LouisianaLA

    3%flat

  • MaineME

    7.15%top

  • MassachusettsMA

    9%top

  • MinnesotaMN

    9.85%top

  • MississippiMS

    4%flat

  • MissouriMO

    4.7%top

  • NebraskaNE

    4.55%top

  • NevadaNV

    0%

  • New HampshireNH

    0%

  • North DakotaND

    2.5%top

  • South CarolinaSC

    6%top

  • South DakotaSD

    0%

  • TennesseeTN

    0%

  • TexasTX

    0%

  • VermontVT

    8.75%top

  • VirginiaVA

    5.75%top

  • WisconsinWI

    7.65%top

Top income tax rates only, for comparison. Your state’s treatment of tips, its brackets and whether it follows the federal tips deduction can differ; check your state’s tax department. Not tax advice.

Rates in force January 1, 2026, from Tax Foundation — 2026 State Income Tax Rates and Brackets.

What counts as a tip

  • Are small tips taxable?

    Every tip is taxable income, whatever the amount and however it is paid: cash, card, check or app. Tips under any reporting threshold still go on your tax return.

    IRS Publication 531, Reporting Tip Income

  • Is an automatic service charge a tip?

    A charge the business adds and sets is wages, not a tip. A tip is voluntary: the customer decides whether to tip, how much, and to whom.

    IRS Publication 531, Reporting Tip Income

Sources & methodology

Sources reviewed: October 23, 2026

Every figure on this page is read from the source linked under it: the IRS for federal rules, the Social Security Administration and Fannie Mae for benefits and mortgages, and Tax Foundation for state rates.