What is Qualified tips deduction?
In short
The One Big Beautiful Bill Act lets workers in occupations that customarily receive tips deduct up to $25,000 of qualified tips a year for 2025 through 2028, whether or not they itemize.
Key takeaways
- The deduction is reduced by $100 for each $1,000 of modified adjusted gross income over $150,000 ($300,000 on a joint return).
- It doesn't reduce adjusted gross income, and tips remain subject to Social Security and Medicare taxes.
- Married taxpayers must file jointly, and a valid Social Security number is required.
Where it's tested
REG: Individual Taxation: Adjustments & Deductions — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Under the One Big Beautiful Bill Act, what is the state and local tax (SALT) deduction cap, and is it permanent?