Qualified Tips

Qualified tips are tips that you received from customers or, as an employee, through a tip-sharing arrangement in an occupation that customarily and regularly received tips on or before December 31, 2024. See Occupations that customarily and regularly received tips on or before December 31, 2024 , later. Qualified tips are tips that are:

Cash tips,

Paid voluntarily,

Not the subject of negotiation, and

Determined by the customer/payor.

Cash tips.

Cash tips are tips received from customers or, in the case of an employee, through a mandatory or voluntary tip-sharing arrangement, such as a tip pool, that are paid in a cash medium, including by cash, check, credit card, debit card, gift card, tangible or intangible tokens that are readily exchangeable for a fixed amount (for example, casino chips), and any other form of electronic settlement or mobile payment app that is denominated in cash. Tips are the excess amount paid by a customer for services over the amount agreed to or otherwise reasonably expected to have been paid for the services in an arm’s-length transaction.

Cash tips don’t include items paid in any medium other than cash. For example, cash tips don’t include:

Event tickets,

Meals,

Services, or

Other assets that aren’t exchangeable for a fixed amount of cash.

TRDA and GITCA programs.

Tips reported pursuant to a Tipped Employee Participation Agreement as part of the Tip Rate Determination Agreement (TRDA) program or a Model Gaming Employee Tip Reporting Agreement as part of the Gaming Industry Tip Compliance Agreement (GITCA) program are considered qualified tips as long as the participating employee is otherwise eligible for the deduction for qualified tips and reports tips using the tip rates established under their agreement. An employee participating in a TRDA or GITCA program may report any additional qualified tips on Form 4137.

Paid voluntarily, not subject to negotiation, and determined by the customer/payor.

Amounts are qualified tips only if they are paid voluntarily and without any consequence in the event of nonpayment. Qualified tips do not include service charges, automatic gratuities, or any other mandatory amounts automatically added to a customer’s bill by the vendor or the establishment, unless the customer is expressly provided an option to disregard or modify such charges, gratuities, and amounts without consequence.

Example 1.

You work on the wait staff at a restaurant. You serve a table with a group of six people. The restaurant has an automatic 18% charge added to a bill of any party of six or more people. The bill includes the 18% automatic gratuity on the “tip line,” and the total bill includes this amount. Even though the restaurant distributed the amount to you and bussers, because the customer did not determine the amount of the additional charge and was not given an express option to ignore or change the amount, the 18% charge is not a qualified tip and may not be deducted.

Example 2.

You work on the wait staff at a restaurant. When you give customers the bill, you present the customer an electronic handheld point-of-sale (POS) device. Besides the charges for the meal and sales tax, the POS device also prompts the customer to leave a tip, giving the option of 15%, 18%, 20%, other, and no tip. The customer selects 18% and pays the total with a credit card. Because the customer had the right to determine the tip amount, including the option to leave no tip, the 18% is a qualified tip.

Amounts received that are not qualified tips.

The following are examples of amounts that are not qualified tips.

Until the issuance of final regulations determining whether a trade or business is an SSTB for purposes of this deduction, and for taxable years beginning before the date the final regulations are published, the IRS will treat employees and self-employed individuals as having received tips in the course of a trade or business that is not an SSTB if the employee is in an occupation that customarily and regularly received tips on or before December 31, 2024. For more information on the transition relief, see Notice 2025-69 .

If your employer is in a specified service trade or business (SSTB), tips received as an employee of that employer are not qualified tips. If you are self-employed in an SSTB, tips received in the course of that trade or business are not qualified tips. If you received tips in the course of another trade or business that is not an SSTB, those tips may be qualified tips if they meet the other requirements. For more information on SSTBs, see the instructions for Form 8995-A.

Tips received while performing a service that is a felony or misdemeanor under applicable law are not qualified tips. However, tips you received for a service that is legal but were received while working for an establishment that violates applicable law in other respects may be qualified tips.

Amounts received for prostitution and pornographic activity are not qualified tips.

Example 1.

You are an employee who works as a bartender but don’t have a license that is required by the state to serve alcohol. State law provides that serving alcohol without a license is a misdemeanor. You received $10,000 in tips during 2025 while serving alcohol at the bar. “Bartender” is on the list of occupations that customarily and regularly received tips. However, because you served alcohol in violation of applicable state law, the $10,000 in tips that you received in 2025 are not qualified tips and may not be deducted.

Example 2.

You are an employee who works as a server at a restaurant that has a bar that serves alcohol. The restaurant doesn’t have a liquor license required by state law. You received $10,000 in tips in 2025 waiting tables at the restaurant. “Wait Staff” is on the list of occupations that customarily and regularly received tips. Even though the restaurant is in violation of applicable state law by not having a liquor license, because working as a server is legal under state law, the $10,000 in tips you received in 2025 are qualified tips and qualify for the deduction.

Occupations that customarily and regularly received tips on or before December 31, 2024.

In order for a tip to be a qualified tip, it must have been paid to you while you were working in an occupation that customarily and regularly received tips on or before December 31, 2024. The list of occupations that customarily and regularly received tips on or before December 31, 2024, provides for each occupation a numeric Treasury Tipped Occupation Code (TTOC), an occupation title, a description of the types of services performed by individuals working in the occupation, illustrative examples of specific occupations that would be included, and the Standard Occupation Classification (SOC) system code(s) that related to the occupation.

The full list of occupations, including the TTOC, occupation title, occupation description, illustrative examples, and SOC code(s) can be found at IRS.gov/TippedOccupations .

Examples of occupations that customarily and regularly received tips on or before December 31, 2024, as well as the occupation title and TTOC, are listed next.

Beverage and food service: bartenders (101); wait staff (102); chefs and cooks (105); dishwashers (108); host staff, restaurant, lounge, and coffee shop (109); and bakers (110).

Entertainment and events: gambling dealers (201), dancers (205), musicians and singers (206), and digital content creators (209).

Hospitality and guest services: baggage porters and bellhops (301), concierges (302), and maids and housekeeping cleaners (304).

Home services: home maintenance and repair workers (401), home landscaping workers and groundskeeping workers (402), home cleaning service workers (407), locksmiths (408), and roadside assistance workers (409).

Personal services: personal care and service workers (501), private event planners (502), private event and portrait photographers (503), pet caretakers (506), tutors (507), and nannies and babysitters (508).

Personal appearance and wellness: massage therapists (602); barbers, hairdressers, hairstylists, and cosmetologists (603); exercise trainers and group fitness instructors (608); and tattoo artists and piercers (609).

Recreation and instruction: golf caddies (701), tour guides (704), and sports and recreation instructors (706).

Transportation and delivery: parking and valet attendants (801), taxi and rideshare drivers and chauffeurs (802), goods delivery people (804), and home movers (809).

Determining the amount of qualified tips received by an employee for 2025.

Because no changes have been made to Form W-2 for 2025, a separate accounting for cash tips you report to your employer may not appear on your Form W-2 for 2025. For 2026, Form W-2 will be updated to provide for a separate accounting for cash tips you report to your employer.

If you received tips as an employee in more than one occupation for the same employer, only those tips that were received in an occupation on the list of occupations that customarily and regularly received tips on or before December 31, 2024, are considered qualified tips. Do not include tips received in occupations that are not included on this list in line 4a, 4b, or 4c.

In order to determine the qualified tips you received as an employee for 2025, you can figure your qualified tips using one of the methods described in paragraphs 1 through 4.

You can use the amount reported to you on your Form W-2 in box 7. Enter this amount on line 4a. If you had more than one employer, see the instructions for line 4c and enter this amount in column 1(b) of the Qualified Tips From More Than One Employer Worksheet.

You can use the total amount of tips reported to your employer on all your Forms 4070 or any similar form used to report your tips monthly to your employer. This amount may be more accurate if the amount in box 1 or box 5 is more than $176,100. Enter this amount on line 4a. If you received tips as an employee from more than one employer, see the instructions for line 4c and enter this amount in column 1(b) of the Qualified Tips From More Than One Employer Worksheet. RRTA If you are a railroad employee who received tips in your RRTA compensation, the tips you report to your employer should be reported to you on your Form W-2, box 14.

If your employer voluntarily chooses to report the amount of your tips in box 14 of your Form W-2 (or on a separate statement), you can use the amount reported to you.

If you are submitting Form 4137, you can use the amount of qualified tips included for the employer in column 1(c) of Form 4137 to enter on line 4b. If you received tips as an employee from more than one employer, see the instructions for line 4c and use this amount to enter in column 1(c) of the Qualified Tips From More Than One Employer Worksheet.

Example 1.

You are a restaurant server and have only one employer. Your Form W-2, box 7, is $18,000. You have no unreported tips. You can use the $18,000 in box 7 to figure the deduction for qualified tips. You enter $18,000 on Schedule 1-A, lines 4a and 4c.

Example 2.

You are a bartender and have only one employer. Your 2025 Form W-2 shows $200,000 in box 1 and $15,000 in box 7. You report $20,000 of tips on Form 4070 and report $4,000 of unreported tips on Form 4137, line 4. You can use the $4,000 reported on Form 4137 plus either the $15,000 from box 7 of your Form W-2 or the $20,000 of tips reported on Form 4070 to figure the deduction for qualified tips.

Determining the amount of qualified tips received by a non-employee for 2025.

Because no changes have been made to Form 1099-NEC, Form 1099-MISC, or Form 1099-K for 2025, a separate accounting for cash tips received by you as a non-employee won’t appear on these Forms. For 2025, the separate accounting requirement is treated as satisfied if your qualified tips are included in the total amount of compensation, income, or payments reported to you on one or more of these Forms. For 2026, these Forms will be updated to provide for a separate accounting for cash tips received by you as a non-employee.

Base your determination of the amount of your qualified tips on documentation such as receipts, point-of-sale system reports, daily tip logs, third party settlement organization records, or other documents that show that the amount you reported as qualified tips is the correct amount.

Make sure to keep a record of the documents you use when determining the amount of your qualified tips.

Example 1.

You are a rideshare driver and receive a Form 1099-K from the rideshare company that includes tips in the total amount of compensation, income, or payments. The rideshare company reports separately in your earnings statement on its rideshare app or website the fares you earned and tips you received during the year. In order to figure the amount of your qualified tips for 2025, you can use the amount designated as tips by the rideshare company in your earnings statement on the rideshare app or website.

Example 2.

You are a self-employed travel guide who operates as a sole proprietor. In 2025, you received cash tips from customers in connection with guided tours. These tips are voluntarily paid by customers in addition to the stated price of the tour. During 2025, you receive a Form 1099-K from the online booking platform customers use to book the guided tours. The Form 1099-K shows $55,000 of total payments, of which $7,000 is customer tips. The Form 1099-K doesn’t separately identify the tips, but you keep a log of each tour that shows the date, customer, and tip amount. Because you have daily tip logs substantiating the $7,000 tip amount, you can use the $7,000 tip amount to figure your deduction for qualified tips. You enter $7,000 on Schedule 1-A, line 5.

Only amounts that appear in the aggregate on Forms 1099 can be considered qualified tips. Any “cash tips” received by the tour guide in actual cash that don’t appear on Form 1099-K cannot be included in the deduction.

If you received qualified tips in the course of more than one trade or business, see the instructions for line 5 and the Multiple Trades or Businesses Worksheet.

Valid SSN for No Tax on Tips.

You and/or your spouse who received qualified tips must have a valid social security number to claim the deduction for qualified tips. A valid SSN for purposes of the deduction for qualified tips is one that is valid for employment and that is issued by the Social Security Administration (SSA) before the due date of your 2025 return (including extensions). If you were a U.S. citizen when you received your SSN, the SSN is valid for employment. If “Not Valid for Employment” is printed on your social security card and your immigration status has changed so that you are now a U.S. citizen or permanent resident, ask the SSA for a new social security card without the legend. However, if “Valid for Work Only with DHS Authorization” is printed on your social security card, your SSN is valid only as long as the DHS authorization is valid.

Line 4a.

See Determining the amount of qualified tips received by an employee for 2025 , earlier, for the amount to enter on this line. If you received qualified tips as an employee with respect to employment with more than one employer, enter -0- on line 4a and see the instructions for line 4c.

Line 4b.

Enter the qualified tips included on Form 4137, line 1, row A, column (c). If you have multiple jobs for which you filed a Form 4137, see the instructions for line 4c and the Qualified Tips From More Than One Employer Worksheet.

Line 4c.

If you and/or your spouse received qualified tips as employees with respect to employment with more than one employer, complete the Qualified Tips From More Than One Employer Worksheet.