I work a night job that is all tips. Turbo tax popped a screen saying that I am eligible for the 25,000 deduction. However, i don’t see any deductions for the tax credit

[DoninGA]

Is your tip income showing in box 7 of the W-2?  If not and you reported these tips to your employer then you will need to get a corrected W-2 from the employer.

If you did not report these tips to the employer then after you completed entry of the W-2, on the following screen check the box for Tips not reported on my W-2 and Continue.

[Vanessa A]

In order to take the deduction for the tips, you must report the tips first.  If you received a W-2, with the tips included in box 1, you can enter the tip amount in box 7.  Entering the amount inbox 7 will trigger the rest of the questions after you hit continue when done entering your W-2.

If the tips were NOT reported to the IRS, since you are saying that your job is ALL tips, you would need to report, you will still go to the W-2 section but continue through the section to the Let's check for other situations screen.  In this screen select that you have Tips not reported on  the W-2 and that you did not get a W-2.  This will allow you to fill out form 4852 used when you do not get a W-2 but you should have and form 4137 for social security and Medicare tax on tips. Going through this process will also give you the options to deduct the eligible tips. 

In order to claim tips, the following must apply:

• The tips MUST be reported.  If they are not reported on a form to the IRS you cannot claim them for the no tax on tips deduction.
  • If employed they need to be reported on your W-2 or form 4137
  • If self-employed, they must be reported on a 1099.  If you received them as cash, they are not deductible. 
• Your income must be below $150,000 if you are single or less than $300,000 if Married Filing Jointly.  Above these amounts, the deduction starts to fade out and is not available at all for those with income over $400,000 for single and $550,000 for Married Filing Jointly.
• You can not claim this deduction if you are Married Filing Separately
• You receive tips from an occupation that normally and customarily receives tips
•  The tips cannot be earned for pornography or prostitution 

If all of the above apply, TurboTax will generate a Schedule 1-A for your return.  This amount will be deducted from your AGI. Remember, this is a deduction NOT a credit.  This means it will lower your taxable income, which can lower your tax liability.  You will  NOT see a refund in the amount of the Tips you enter. Tips are reported on Schedule 1-a, Part II with the total amount you are qualified for reported on line 13 of Schedule 1-A.

If you are getting the deduction and have income left to reduce, you will see the change to your income on line 11a of your form 1040.  If your AGI is lower than  your tip deduction, your benefit from the deduction will be limited to your AGI before the deduction. 

To see your form 1040 you can switch to forms mode if you are using TurboTax Online or if you are using the online version you can select Tools>>Tax Tools>> Preview my 1040.

This is the "learning year" for all the new changes and not all companies are reporting things the same way yet.  Box 7 is not a box that the IRS generally uses for anything.  They are most concerned with box 1 and 2 and then the rest of your forms that are filled out and filed.