What ‘No Tax On Tips’ Means For You

As a server, bartender, or waitress, you probably earn most of your income from tips. People can leave tips in many ways, including cash. It may be tempting to leave this amount out when you’re calculating your gross income. But the fact is, the IRS wants to know all your income – including tips. 

Under the  One Big Beautiful Bill (OBBB), a new provision being referred to as “no tax on tips” was introduced in 2025. Despite its nickname, it doesn’t make tips completely tax-free. It allows eligible workers to deduct up to $25,000 of qualified tip income from their federal taxable income.  

Are tips taxable income?

Yes. The IRS assumes that if you work in a restaurant or similar industry, you will earn tips at an average of 8%. If you regularly report tips under this amount or don’t report any tips, the IRS may investigate.  

There are other types of gratuity that you might receive. These can include:  

• Tickets to a game or event   

• Vouchers or coupons  

• Other non-cash items  

You do not have to report these as income to your boss, but you are still responsible for reporting the fair market value to the IRS.  

If your restaurant includes service charges for large parties, you are not required to report it to your employer because it is already accounted for and should be included in your wages. But, if the customer leaves you an additional tip on top of the service charge, you will need to report that.   

What should be included as tip income for my taxes? 

Tips are usually paid through credit/debit card or with cash.  

What about shared or pooled tips? 

If you receive a pooled tip or share your tips with your team, you are only responsible for reporting what you actually bring home. For example, let’s say you make $150 for one table but give $40 to the bartender and $20 to the busser. In that case, you will only report the $90 you took home.   

How does the ‘no tax on tips’ deduction work? 

You may have heard “no tax on tips” as a popular way to describe the newest tax law that allows eligible workers to exclude up to $25,000 in tip income from their taxable income between 2025 and 2028. This means that qualified tips can be deducted from your federal income tax calculations. However, it’s important to note that these tips remain subject to employment taxes, including Social Security and Medicare.  

The deduction begins to phase out once a taxpayer’s Modified Adjusted Gross Income (MAGI) exceeds $150,000, or $300,000 for those filing jointly. The deduction is not available for those making above $400,000 as a single filers or joint filers making above $550,000.  

To claim the tip income deduction, report all your tips on your tax return using the W-2 your employer provides. Then, use Form 1040 to deduct up to $25,000 in qualified tips from your taxable income. 

How do I report tips to my employer? 

You can use Form 4070A to track of your tips as you earn them. Then, use Form 4070 to report them to your employer by the 10th day of the following month. So, to report tips you earned in January, turn your Form 4070 in by February 10th.  

What is the tax rate on tips?

Tips are taxed just like regular income. That means they’re subject to federal income tax, based on your tax bracket. So, if you earn tips, they get added to your total income and taxed at the same rate as your wages. 

How to report tips to your employer or the IRS

All tips should be included in your taxable income, regardless of who you report them to.  

To your employer

If you make more than $20 in tips per month, report them directly to your employer. This will allow your boss to keep track of expenses and sales and also help them to correct your tax withholding percentage.  

You can use Form 4070A to track of your tips as you earn them. Then, use Form 4070 to report them to your employer by the 10th day of the following month. So, to report tips you earned in January, turn in your Form 4070 by February 10th.   

If you earn tips from more than one job, you’ll need to treat each one separately. That is, you won’t add up your tips from different jobs. You will report your gratuity for each job individually. 

To the IRS

If you make less than $20 in tips per month, it will not impact your tax bill the same way. You can report these directly to the IRS using Form 4137.   

Are taxes withheld from my tip income?

If you are earning more than $20 per month in tips, your employer should withhold FICA tax for Social Security and Medicare. This is why it is so important for you to report gratuity to your employer. They can withhold the right amount of tax during the year, so you won’t get hit with a surprise tax bill when you file. 

What is the penalty for not reporting tips?

If you fail to report your tips, the IRS can fine you as much as 50% of the tax (Medicare and Social Security) you were supposed to pay on that amount. 

Something small can support your bigger vision.

Audit your day.

Where are you following other people’s routines that don’t actually serve you?

Define your peak hours.

When do you perform best, morning, afternoon, or night? Build around that.

Cut one forced habit.

If something drains you daily, replace it with something that fuels you.

Build one habit that aligns with your purpose.

Something small that supports your bigger vision.

The whole point of entrepreneurship is freedom.

Success doesn’t have a start time.

Some people win before sunrise. Others win after dark. The time isn’t the variable. The consistency is.

Tried copying others? It never works.

Every time I followed someone else’s structure, I ended up frustrated. My results came when I created my own.

Alignment creates momentum.

When your habits match your goals, everything flows easier.

Your system should serve your life.

Not the other way around. The whole point of entrepreneurship is freedom, not burnout. 

Discipline should create freedom.

Discipline is personal.

It’s not about what time you wake up. It’s about showing up when you said you would.

Habits mean nothing without purpose.

You can be busy every day and still move nowhere.

The best systems fit your strengths.

Stop trying to copy routines that don’t fit your life. Build what supports your mission.

Discipline should create freedom.

If your routine feels like a cage, it’s not a system. It’s self-sabotage.

What is the Augusta Rule?

Did you know you can rent your home to your business up to 14 days a year — completely tax-free?

It's called the Augusta Rule, and most business owners have no idea it exists.

Even worse, their CPA doesn’t either. 

Your business pays you fair market rent to use your home for legitimate business purposes — meetings, strategy sessions, client events, or board meetings.

You receive the rental income tax-free (no income tax, no self-employment tax).

Your business can deduct the full rental expense.

Unfortunately, most CPAs never mention this strategy. 

Want to see what other strategies you're missing?

Struggling to Stand Out on LinkedIn?

This One Tactic Changes Everything.

With so much noise on LinkedIn, it’s harder than ever to stand out. But what if I told you there’s a simple way to amplify your reach and boost your authority—without spending a dime?

That’s where publishing articles comes in.

If you’re like most LinkedIn users, you’re probably focused on building connections and posting updates, but the real game-changer is something most people completely overlook—publishing long-form content. Regularly publishing articles on LinkedIn gives you a powerful edge, helping you establish your authority and make a lasting impression on your network.

Here’s why this tactic changes everything:

1. Showcase Your Expertise and Provide Constant Value

Publishing articles allows you to go deeper than short posts or comments. It gives you the space to share meaningful insights, strategies, and lessons that resonate with your audience. This positions you as a go-to expert in your field, making people take notice of your expertise and view you as a thought leader.

2. Stay in Front of Your Audience Weekly

Visibility is key to success on LinkedIn, and consistent article publishing ensures you stay top-of-mind. Each week, your audience sees your name pop up in their feed, reinforcing your brand and building trust. The more valuable content you share, the more likely people will turn to you when they need advice, services, or solutions.

3. Leverage the LinkedIn Algorithm to Maximize Your Reach

LinkedIn rewards content that engages users and keeps them on the platform. Articles, being long-form, tend to keep readers’ attention longer than short posts. This makes LinkedIn’s algorithm more likely to prioritize your content, giving you better reach and exposure to new audiences, especially when your articles spark conversations.

4. Boost Your SEO and Organic Ranking

Publishing on LinkedIn not only enhances your presence on the platform but also improves your organic ranking on search engines. Since LinkedIn articles are indexed by Google, you’ll start showing up in search results for key topics related to your field, boosting your visibility and driving more traffic to your profile.

5. Not Publishing? You’re Missing Out on Massive Growth

If you're not taking advantage of LinkedIn’s publishing feature, you're leaving growth on the table. By consistently publishing articles, you gain more visibility, attract a larger audience, and build your reputation as a thought leader in your industry. Missing this opportunity means missing out on new connections, clients, and opportunities to grow your business.

Final Thought: Don’t Get Lost in the Noise—Stand Out by Publishing Articles

In a crowded LinkedIn feed, publishing articles is a surefire way to set yourself apart. Start sharing your insights today, and you’ll soon notice how this one simple tactic can change everything for your LinkedIn presence—and your business growth.

Step outside....

I’ve been thinking lately about how easy it is to live life inside boxes—our homes, our cars, our offices, even our screens. We move from one to the next, barely noticing that we’ve traded fresh air and sunlight for fluorescent lights and task lists. And while those boxes might keep us comfortable, they also keep us contained.

Let's explore what happens when families step outside those boxes—literally and emotionally. When we slow down, breathe in the fresh air, and let ourselves (and our kids) get a little messy, something shifts. Nature has a way of grounding us, reminding us to notice—how the air feels, what our body needs, and what it means to be fully present.

And maybe that’s the heart of it. Life, work, and parenting don’t always need more structure or more rules. Sometimes what we really need is space. Space to feel, to listen, to reconnect—with ourselves, our children, and the world around us. Whether that’s creating a calm corner in your home, taking a walk together after dinner, or just looking up from your phone long enough to notice the sunset—it all counts.

So this week, I invite you to step outside, literally or figuratively. Let yourself breathe beyond the boxes. You might be surprised by how much calmer, connected, and whole you feel.