With tax season approaching, millions of workers could soon claim the “no tax on tips” deduction, which offers a tax break for returns filed in 2026. But some experts question which workers will benefit from the policy.
Enacted via President Donald Trump’s “big beautiful bill,” the provision allows certain workers to deduct up to $25,000 of “qualified tips” per year on federal returns from 2025 to 2028.
The tips deduction phases out, or gets smaller, once modified adjusted gross income exceeds $150,000 for single filers or $300,000 for married couples filing jointly.
Both Trump and former Vice President Kamala Harris floated “no tax on tips” during the 2024 presidential campaign. Republicans enacted the capped deduction via their multi-trillion-dollar tax-and-spending package in early July.
Approximately 6 million workers report tipped wages, according to IRS estimates released in November. But not all tipped workers qualify.
