The One Big Beautiful Bill Act (OBBBA) makes tip income “tax-free.” But as with any new tax law, the fine print matters, and some of these details still need clarification.
From January 1, 2025 through December 31, 2028 you can deduct up to $25,000 as a deduction equal to the amount of qualified tips you receive during the year. These tips must be included on IRS approved statements furnished to the individual to take advantage of the deduction.
There is an income limit of $150,000 for single filers and $300,000 for joint filers. This income limit is modified adjusted gross income, including the tips. The deduction amount is reduced (but not lower than zero) by $100 for each $1,000 in excess of these amounts.
A list of qualifying businesses will be published on or before December 31, 2025.
Stay informed by visiting our Tax Reform Resource Center at AlloySilverstein.com/tax-reform.
If you think you may qualify for this deduction, start getting your tip records in order now. The IRS will clarify the rules within the next 90 days. Have questions? Contact us to review your financials together
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