Level 7

Solved

No tax on tips

Forum|Forum|5 months ago
January 29, 2026
2 replies
16 views

IRS says: No tax on tips
Employees and self-employed individuals may deduct qualified tips received in certain qualified occupations, such as wait staff, bartenders, salon workers, personal trainers, gig economy workers, and many more who customarily and regularly receive tips might qualify.

Even better, tips earned on or before December 31, 2024, and are reported on a Form W-2, Form 1099, or other statement furnished to the individual or reported directly by the individual on Form 4137 can be deducted.

I don’t understand the part that I highlighted. Does this mean that we can deduct tips that were given in 2024 on the 2025 tax return?

ProSeries Professional

Best answer by HOPE2

@HOPE2 wrote:

Issue Number: Tax Tip 2026-06

It looks like the actual Tax Tip has been corrected.

https://www.irs.gov/newsroom/one-big-beautiful-bill-how-to-take-advantage-of-no-tax-on-tips-and-overtime

Here is a link to the wrong email that was sent:

https://content.govdelivery.com/accounts/USIRS/bulletins/4062537

@TaxGuyBill Great catch thank you.

T

TaxGuyBill

Level 15

Do you have a link for where you are seeing that?

It is garbling things up. Only tips paid in 2025 (and later) qualify.

The "on or before December 31st, 2024" is referring to jobs that are customarily tipped. It is basically saying only jobs that are customarily tipped qualify. That determination of "customarily tipped jobs" is based on what was customarily done "on or before December 31st, 2024".

Camp1040

Level 10

Certain parts sound like an AI hallucination!

T

TaxGuyBill

Level 15

@Camp1040 wrote:

Certain parts sound like an AI hallucination!

You are probably right. I hate it when people are asking things based on stupid AI answers.

E

Elisabeth

Level 2

I have an issue with Lacerte concerning the QBI calculation and no tax on tips. My program is not decreasing the QBI by the credit for tip income that has been included in business income. The program forces me to override the amount of tip income reported on a 1099K (there isn't a field for 1099K, only for 1099MISC and 1099NEC). The override does provide me with a credit against taxable income, but it does not reduce the QBI before allowing the 20% QBI deduction. Has anyone else come across this issue?

Betty

T

TaxGuyBill

Level 15

@Elisabeth wrote:

The program forces me to override the amount of tip income reported on a 1099K (there isn't a field for 1099K, only for 1099MISC and 1099NEC).

Does it work correctly if you enter it as a 1099-NEC?

If so, I would just do that. The 1099 isn't sent with the e-file, so it doesn't really matter.

The may be another way to do it or it could just be a program error, but I would just enter it as a 1099-NEC if that gives the correct result.

Issue Number: Tax Tip 2026-06

Sign up

Login with SSO

Let's get you signed in

Login with SSO

Scanning file for viruses.

This file cannot be downloaded