Summary
The new “no tax on tips” provision lets eligible tipped workers deduct up to $25,000 of their tip income from federal taxable income for the 2025 tax year. The benefit phases out for higher earners—single filers above $150,000 or joint filers above $300,000—and requires a valid Social Security number. It aims to let bartenders, baristas, and others in service jobs report tips accurately without owing federal income tax on that portion. Workers still must pay payroll taxes on tips, and state taxes may still apply. The deduction is claimed when filing 2025 returns this spring.
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