Tipped workers can deduct up to $25,000 in reported tips annually from 2025 to 2028 under new Treasury rules.

The U.S. Treasury has released guidance on President Trump’s "no tax on tips" provision, part of a July 2025 tax and spending law, allowing certain tipped workers to deduct up to $25,000 in qualified tips annually from 2025 to 2028. The benefit, retroactive to January 1, 2025, applies to jobs like sommeliers, cocktail waiters, and massage therapists, with tips needing to be voluntary, reported to the IRS, and given in cash, check, debit card, gift card, or equivalent. Tips for illegal activities or mandatory gratuities do not qualify. The deduction phases out for those earning over $150,000 in modified adjusted gross income and is not available to married couples filing separately. Payroll taxes for Social Security and Medicare still apply, and the provision is projected to increase the deficit by $40 billion through 2028.