Quick answer
From 2025 through 2028, workers in IRS-listed tipped occupations can deduct up to $25,000 of qualified tips per year from federal income tax. Gig workers qualify.
- The final IRS list includes Taxi and Rideshare Drivers and Chauffeurs (TTOC 801), Shuttle Drivers (802), Food Delivery Drivers (803) and Other Delivery and Courier Workers (804).
- The deduction phases out above $150,000 of modified AGI ($300,000 joint).
- For self-employed workers, it can’t exceed your net profit from the gig work.
- It does not reduce self-employment tax. You still pay 15.3% on tips.
- You claim it on Schedule 1-A, whether you itemize or take the standard deduction.
Who qualifies
The occupation list
Treasury and the IRS issued final regulations in April 2026 listing more than 70 occupations that customarily received tips before 2025. Each has a three-digit Treasury Tipped Occupation Code (TTOC). The 800s cover transportation and delivery.
| TTOC | Occupation | Gig examples |
|---|---|---|
| 801 | Taxi and Rideshare Drivers and Chauffeurs | Uber, Lyft |
| 802 | Shuttle Drivers | Airport shuttle gigs |
| 803 | Food Delivery Drivers | DoorDash, Uber Eats, Grubhub |
| 804 | Other Delivery and Courier Workers | Grocery and package delivery |
Other gig-relevant codes include Digital Content Creators (209). The full list is at IRS.gov/TippedOccupations. Check the code your platform reports, and confirm it matches the work you did.
Other requirements
- You need a Social Security number valid for employment.
- If married, you must file jointly.
- For self-employed workers, the business can’t be a specified service trade or business (SSTB). Driving and delivery aren’t SSTB fields, and IRS transition relief treats listed tipped occupations as qualifying while SSTB rules are finalized.
What counts as a qualified tip
Qualified tips are voluntary payments from customers, in cash or charged through an app or card. The customer must decide the amount, and it can’t be negotiated.
| Payment | Qualified tip? |
|---|---|
| Tip a rider adds in the Uber or Lyft app | Yes |
| Tip a customer adds on a DoorDash order | Yes |
| Cash tip handed to you | Yes, if properly reported and documented |
| Base pay, per-trip fares | No |
| Peak pay, promotions, quests, bonuses | No |
| Mandatory service charges or fees | No |
How tips are reported for self-employed gig workers
Tax year 2025
Platforms weren’t required to show tips separately on 2025 forms. IRS guidance (Notice 2025-69) lets self-employed workers use platform records, earnings statements or daily tip logs to prove qualified tips. Most apps show tips in your annual summary.
Tax year 2026 and later
For 2026, the IRS added tip boxes to the 1099 forms:
| Form | Cash tips box | TTOC box |
|---|---|---|
| 1099-NEC | Box 1b | Box 1c |
| 1099-K | Box 1c | Box 1d |
| 1099-MISC | Box 13a | Box 13b |
Remember: a 1099-NEC is only required at $2,000 for 2026, and a 1099-K at over $20,000 and 200 transactions. If you don’t get a form, keep your app’s tip reports. Tips must still appear on a statement or be reported properly to qualify, so records matter. See Didn’t Receive a 1099.
The limits
$25,000 cap
The cap is $25,000 per return, even on a joint return where both spouses earn tips.
Income phase-out
The deduction drops by $100 for each $1,000 of modified AGI above $150,000 ($300,000 joint).
| Single filer MAGI | Maximum deduction |
|---|---|
| $150,000 or less | $25,000 |
| $170,000 | $23,000 |
| $200,000 | $20,000 |
| $400,000 | $0 |
Net income limit
For self-employed workers, the deduction can’t exceed net profit from the business where you earned the tips, before this deduction. A part-time driver with $5,000 of tips but only $3,000 of net profit after mileage can deduct $3,000.
Self-employment tax still applies
The deduction reduces taxable income for income tax only. Tips stay in your Schedule C profit, so the 15.3% SE tax applies in full. Your state may or may not follow the federal deduction.
Worked example
Carlos drives for Uber and delivers for DoorDash full time in 2026. He is single.
| Item | Amount |
|---|---|
| Total earnings, including $16,000 of app tips | $66,000 |
| 14,000 miles Jan to Jun × $0.725 | $10,150 |
| 15,000 miles Jul to Dec × $0.76 | $11,400 |
| Phone, supplies, tolls | $1,500 |
| Net profit | $42,950 |
| Tax | Without tips deduction | With $16,000 tips deduction |
|---|---|---|
| Self-employment tax | $6,069 | $6,069 |
| Federal income tax (approx.) | $2,038 | $625 |
| Total federal | $8,107 | $6,694 |
The deduction saves Carlos about $1,413. His tips are under $25,000, his profit exceeds his tips and his MAGI is far below $150,000, so he gets the full amount. The figures are simplified and include the standard deduction and QBI deduction, which the tips deduction partly reduces.
Planning tips
- Track tips separately from base pay in a spreadsheet or app, especially cash tips.
- Don’t skip the mileage log. Mileage lowers your profit, which lowers SE tax. The tips deduction doesn’t.
- Adjust estimated payments. Your income tax may drop, but SE tax doesn’t. See Quarterly Estimated Taxes and How Much Should I Set Aside for Taxes as a 1099 Contractor?.
- Plan for 2029. The deduction is scheduled to end after 2028.
Frequently asked questions
Do Uber and DoorDash drivers qualify for no tax on tips?
Yes. Rideshare drivers (TTOC 801) and food delivery drivers (TTOC 803) are on the final IRS list. Only voluntary customer tips qualify.
Do I still pay self-employment tax on tips?
Yes. The deduction only reduces federal income tax. SE tax of 15.3% still applies.
Do I need to itemize to claim it?
No. You claim it on Schedule 1-A, and it works with the standard deduction.
What if my tips are more than my profit?
Your deduction is limited to your net profit from that gig business. Extra tips don’t create a loss.
This article is general information, not tax advice. Consult a CPA or Enrolled Agent for your situation.
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About this guide
Written by the Freelancer Tax HQ editorial team, based on our professional experience, official US government sources (IRS, SSA and other agencies) and reputable informational articles listed in the sources below. Last reviewed on . Tax rules change often, and we update this guide when they do. Read our editorial policy or report an error.
Sources
IRS: Final regulations listing tipped occupations; Federal Register: Occupations that customarily and regularly received tips; IRS Notice 2025-69; IRS: Guidance for individuals who received tips or overtime in 2025; IRS: What the No Tax on Tips deduction means for you; IRS: Schedule 1-A, Additional Deductions; CPA Practice Advisor: New 1099 reporting rules; Greenshades: No tax on tips occupation list. Example figures are FreelancerTaxHQ illustrations.
Official resources linked in this guide: IRS: Tax preparer credentials.