11/08/2025
(This Article is shared from Vlad Lapochkin):
Heads-up for everyone in tipped work 🍽️:
The IRS has proposed a new deduction for “qualified tips” starting in 2025. If you’re in an eligible occupation, earn tips (not automatic service charges), and report properly, you could reduce your taxable income.
✅ Eligible Payments: Cash, check, credit/debit cards, gift cards, electronic or mobile payments (Venmo, PayPal), and certain tokens (like casino chips).
⛔️ Ineligible Payments: Event tickets, meals, services, or other assets not exchangeable for a fixed cash amount (including most crypto).
Automatic Gratuities & Fees: Tips added automatically by a business - gratuities, service charges, or other mandatory fees - don’t count unless the customer is clearly given the option to accept, decline, or modify the amount without penalty.
😭 Cap on Deduction: Some Nevada lawmakers requested up to $50,000 for married couples where both spouses earn tips. The Treasury unfortunately rejected this; the annual cap is $25,000 per return, regardless of filing status.
💣 Specified Service Trade or Business (SSTB) Exception:
Certain occupations or business types are excluded. An SSTB is a business in fields like health, law, consulting, athletics, financial services, or the performing arts.
Example 1: A self-employed (1099) comedian performing at a venue receives tips → not eligible because the work falls under SSTB.
Example 2: A W‑2 bartender employed by a non-SSTB company at a theater receives tips → eligible because the employer is non-SSTB and the occupation qualifies.
Final rules may change. Expect refinements after public comments and the end of the government shutdown.
Got questions about tips or taxes? Send me a message - I’ve got you covered!
