Why can’t I deduct on my tips

Forum|Forum|5 months ago
January 6, 2026
3 replies
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TurboTax Online

xmasbaby0

Level 15

The software is not yet updated for the tax law changes regarding tips. Please be patient and watch for updates, which typically happen on Thursdays. If you are in a rush to file your tax return, keep in mind that the IRS will not begin to accept returns until the end of January.

**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**

user17701358437

Level 2

When Is Turbo Tax going to update It's software so I can enter my cash tips on Form 1A?

DoninGA

Level 15

@user17701358437 If you reported the tip income to your employer it should be in box 7 of your W-2. If you have unreported tip income, then after you have completed the W-2, on the following screen check the box Tips not reported on my W-2 and continue.

DoninGA

Level 15

Tips are income that has to be reported on a tax return. On the federal tax return, there are will not be any federal taxes on the tip income if you are eligible for this deduction.

This is reported on IRS Schedule 1A which is estimated to be available in TurboTax on 01/14/2026.

There is no complete elimination of tax on tips. However, a new federal law, the "One Big Beautiful Bill Act," provides a temporary federal income tax deduction for up to $25,000 of qualified tip income per individual, effective for tax years 2025 through 2028.

Key Details of the "No Tax on Tips" Provision

It is a deduction, not a full exemption: Tips are still considered taxable income, but eligible individuals can deduct a significant portion, reducing their overall federal income tax liability.
Payroll taxes still apply: All tips remain subject to Social Security and Medicare (FICA) taxes, which must still be reported to employers.
Maximum Deduction: The maximum annual deduction is $25,000 per individual.
Income Limits: The deduction begins to phase out for taxpayers with a modified adjusted gross income (MAGI) over $150,000 (single filers) or $300,000 (married couples filing jointly).
Qualifying Tips: Only "qualified tips" are eligible. These must be voluntary (not mandatory service charges), not negotiated, and received in occupations that "customarily and regularly received tips" before 2025.
Eligible Occupations: The IRS has issued guidance with a list of nearly 70 eligible occupations, including bartenders, restaurant servers, casino dealers, hotel housekeepers, and various personal service workers.
Claiming the Deduction: For the 2025 tax year, the deduction can be claimed when filing your federal income tax return in early 2026 using the new Schedule 1-A (Form 1040).
State Taxes: This is a federal tax deduction. State and local tax treatment of tips may vary, so you should check with your state's tax agency for specific guidance.

ItsHyphy

Level 2

I still can not deduct my tips for federal taxes but i can for my overtime. Would be nice to be able to do both.

DoninGA

Level 15

wrote:
I still can not deduct my tips for federal taxes but i can for my overtime. Would be nice to be able to do both.

What is preventing you from reporting your tips? Are tips reported in box 7 of your W-2? Do you have unreported tips?

After you enter the the W-2 you will land on a screen labeled Let's check for uncommon situations. If you have unreported tips then check the box labeled Unreported tips and then Continue with this section.

@ItsHyphy

ItsHyphy

Level 2

I don't have any unreported tips. My tips show up as “qualified tips” in box 14. After I fill in my w-2 the unusual situations page suggests overtime but not tips. My overtime is also in box 14. Nothing about tips comes up at all even when continuing until I am finished with my federal taxes. I tried searching for it but nothing I do brings up the tips.