Under the One Big Beautiful Bill, tips under $25,000 may qualify for a new tax deduction for workers earning $150,000 or less. To reflect your tip wages under $25,000 and claim the deduction: 1. ...
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Under the One Big Beautiful Bill, tips under $25,000 may qualify for a new tax deduction for workers earning $150,000 or less. To reflect your tip wages under $25,000 and claim the deduction: 1. Report your tip income fully, including these wages, in the Wages & Income section. 2. TurboTax should guide you to enter tip wages not reported on your W-2 using the Tips Not Reported on My W-2 option. 3. The deduction for tip income is applied as a below-the-line deduction on Schedule 1-A (Part II - No Tax on Tips) as part of your tax return. 4. Ensure your total income does not exceed $150,000 to qualify for this deduction. Note that the tips remain taxable for Social Security and Medicare purposes, but this bill provides an income tax deduction benefit for qualifying tip income under $25,000.