What does no tax on tips mean?

Starting in 2025, there's a deduction for qualified tips income. This has sometimes been called, "no tax on tips". You can deduct up to $25,000 of your tips income.

To qualify, you'll need to:

• Have qualified tips income
• Have a Social Security number
• Be unmarried or file jointly with your spouse if you are married

The deduction phases out if your income is more than $150,000 or $300,000 if married filing jointly.

We'll ask you how much of your income is from qualified tips when you enter income on your W-2, 1099-MISC, 1099-NEC, 1099-K, or unreported tips.

To take the deduction if you are self-employed or an independent contractor, you'll need a 1099-MISC, 1099-NEC, or 1099-K.