No Federal Income Tax on Tips — the Full 2025 Rules Are Here

Which jobs qualify, what counts as a tip, and how to track it retroactively for 2025.

The IRS finally published Notice 2025-58 on August 22 with the official list and tracking rules. Here's exactly what counts — and what doesn't — for the new OBBBA tip deduction that's retroactive to January 1, 2025.

1. Which jobs qualify?

The IRS official list (partial) includes:

• Food & beverage servers
• Bartenders
• Hair stylists, barbers, and nail techs
• Taxi, Uber, Lyft, and rideshare drivers
• Hotel bellhops & housekeepers who receive direct tips
• Food-delivery drivers (DoorDash, Uber Eats, Grubhub, etc.)
• Casino dealers, golf caddies, and tour guides

If your occupation is on the list (the full 47-page PDF is on IRS.gov), 100% of your reported tips are deductible.

2. What actually counts as a "tip"?

• Cash handed directly to you
• Credit-card tips added to the bill
• Tips received through an app or tip-splitting pool

It does NOT include:

• Mandatory service charges (the 18–20% auto-gratuity restaurants add)
• Tips you never reported to your employer

3. How to prove it on your 2025 return

The deduction goes on Schedule 1, Line 8z — "Qualified Tips – OBBBA." You do not need to attach receipts, but keep records in case of audit:

• Pay stubs showing tips reported
• Credit-card tip reports from Square, Stripe, or Toast
• A personal tip log (date, amount, source)

Quick Bookkeeping Fix (takes 2 minutes)

In QuickBooks, Xero, or Wave, create a new income account called "Nontaxable Tips – OBBBA" and reclassify every tip deposit to it starting now. When you run a P&L at year-end, that total flows straight to Schedule 1, Line 8z.

One surprise many people miss

If you already paid estimated taxes on your tips in Q1–Q3, you'll get that money back as an overpayment refund when you file in 2026 — or you can reduce your Q4 estimated payment by the same amount.