topic Tips Credit for Self-Employed` in Get your taxes done using TurboTax

Tips Credit for Self-Employed`

Neens — Wed, 14 Jan 2026 22:18:49 GMT

I have a client who is self-employed as a hair dresser and receives tips. I would like to record the tips credit for her but under the "Qualified Tips Smart Worksheet for Schedule 1-A, Part II", none of the business information for net profit appears and there are two asterisks next to "All other tips (such as cash) from individuals" that says these tips are not currently eligible but may be in the future.

Does this mean the tips credit doesn't apply to self-employed individuals? Or do I need to check a box or record something elsewhere within Proseries?

Thank you!

Re: Tips Credit for Self-Employed`

RobertB4444 — Wed, 14 Jan 2026 22:25:04 GMT

Self-employed individuals in a line of work that customarily and regularly receive tips are eligible to take the deduction and that includes hairdressers. Make certain that you have the correct employment selected.

Re: Tips Credit for Self-Employed`

Neens — Wed, 14 Jan 2026 23:31:05 GMT

I just realized it only allows the tip credit if the tips are coming from Form 1099. They are not allowing cash tips to be reported.

Re: Tips Credit for Self-Employed`

Vanessa A — Wed, 14 Jan 2026 23:39:23 GMT

If she will get a 1099-K, you can still take the tip deduction IF she kept daily logs showing the amount of tips. If she does not get a 1099-K or any type of statement and does not report them on form 4137, she cannot take the deduction.

Re: Tips Credit for Self-Employed`

VolvoGirl — Thu, 15 Jan 2026 18:50:55 GMT

@Neens Just noticed you said ProSeries. This is the Turbo Tax personal forum. Forum for ProSeries and Accountants https://accountants.intuit.com/support/en-us

Re: Tips Credit for Self-Employed`

LLCDriver — Sun, 01 Feb 2026 21:48:16 GMT

I'm having an issue with the calculation for tips on the Qualified Tips Smart Worksheet for Schedule 1-A, Part II. Here's what the information shows:

Line B 1 - Net Profit is entered.

Line B 2 - Other Deductions which is the adjustments to income Schedule 1, Line 26

Line B 3 - Calculated the Net Income for the business by subtracting Line B from A.

Line C e - My tip amount is correctly enteered. It exceeds BOTH my Net Profit (Line B 1) and my Net Income (Line B 2).

Line G - TT has entered in my NET INCOME from Line B 3. It also has the box checked with an X. This amount is incorrect. It should be the NET PROFIT from Line B 1.

What am I missing? Please advise.

Re: Tips Credit for Self-Employed`

DaveF1006 — Tue, 03 Feb 2026 20:11:44 GMT

No, this is not a mistake. In the case of a self-employed taxpayer, the tip deduction is legally capped at your Net Income (Line B3), not your Gross Net Profit (Line B1). This is why the box is checked with an X.

The law says that the tip deduction for a business owner can't be more than the money the business makes.

Line B1 (Net Profit): This is your income minus your direct business expenses, as shown on Schedule C, Line 31.
Line B2 (Adjustments): These are “above-the-line” expenses the IRS counts as part of being self-employed. The most common is the deductible part of your Self-Employment Tax (usually 50% of what you paid).
Line B3 (Net Income): This is your taxable profit after those required adjustments are taken out.

Your tip deduction can’t be more than your net business income after adjustments (line B3). Since your tips are higher than your profit, TurboTax is applying this limit correctly.

@LLCDriver

Re: Tips Credit for Self-Employed`

LLCDriver — Wed, 04 Feb 2026 21:05:50 GMT

Thanks for the clarification.

Part of the problem for me was looking at the TT worksheets around January 20-23. In the worksheet it had the value in B1 as the qualified tip amount with an X on line G and the value was blank. It then showed that amount on line 10 of the 1040.

When I started doing some what-if scenarios this past weekend I noticed the change. Obviously, this was a bug in TT. I was also confused as the TT worksheet says, "If the box is checked, the tip amount is limited to net profit" which is the same term used in line B1.