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Find out how much of your tip income is tax-deductible under the new 2025 tax laws.
Your Deductible Tip Amount for 2025 is:
The "One Big Beautiful Bill Act" introduced a major new tax break for 2025 that directly benefits anyone who earns tips. This calculator is built to handle this new rule perfectly. Here’s what you need to know about it.
For the first time, taxpayers in qualifying occupations can deduct their tip income directly from their taxable income. The deduction is capped at a maximum of $25,000 per year. This is a powerful benefit because it means a significant portion of your income may not be subject to income tax.
The deduction is designed for workers in traditionally tipped occupations. While the IRS maintains the official list, it generally includes jobs like:
This is an important detail. The deduction is targeted toward low- and middle-income earners. It begins to phase out (meaning it gets smaller) and eventually disappears if your income is too high.
Our calculator automatically checks these limits for you when you enter your income and filing status.
Not exactly, and this is a key point. You still pay Self-Employment Tax (15.3% for Social Security and Medicare) on all your tip income. The new law only makes your tips deductible for income tax purposes.
Think of it this way: the deduction reduces the amount of your income that is subject to the 10%, 12%, 22%, etc. tax brackets, which is where the biggest savings are.