Summary
The IRS released a new form for taxpayers to claim deductions for tips, part of measures introduced by President Trump in the One Big Beautiful Bill Act. This change means that from 2025 to 2028, service workers can deduct tips they receive from their taxes. However, the benefit varies, with lower-income tipped workers possibly not gaining much advantage.
Key Facts
- The IRS introduced Schedule 1-A for claiming deductions on tips, overtime, and car loans.
- "No Tax on Tips" was part of President Donald Trump’s presidential campaign promises.
- The tip deduction is available from 2025 to 2028.
- Qualified jobs include roles like waiters, bartenders, and gig economy workers.
- Taxpayers can deduct up to $25,000 per year for qualified tips.
- The deduction does not apply to tips from illegal activities like sex work.
- The deduction phases out for incomes above $150,000 (or $300,000 for joint filers).
- Tipped workers must report tips and couples need to file jointly to qualify.
