No Tax on Tips Helpon 2025 versus 2026
The deduction started in 2025, before the forms caught up. So 2025 has its own rules, and 2026 brings new boxes. Here's the difference.
Why 2025 has its own rules
The law passed in July 2025, after the 2025 W-2 and 1099 forms were already set. Those forms have no box for qualified tips.
So the IRS issued Notice 2025-69. It tells workers which amounts they can use to show their tips for 2025.
What the notice lets you use
Employees can use box 7 of the W-2, the total of their Forms 4070, a tip amount the employer reports in box 14 or on a separate statement, and tips they report on Form 4137.
Self-employed workers can count tips that are included in the totals on their 1099s, backed by their own records.
Transition relief for 2025
Employers and other payers got penalty relief for 2025 tip reporting, because the forms weren't ready.
There's also relief on the service trade rule. Until final rules apply, the IRS treats someone working in a listed tipped job as outside a specified service trade or business.
The final rules, issued in 2026
The Treasury and the IRS issued final regulations, TD 10044, effective June 12, 2026. They adopt the list of occupations that receive tips and define a qualified tip.
Two points from the final rules. Tips can be paid by cash, check, card, gift card or a payment app. And money a manager or supervisor gets from a tip pool doesn't count. Read the final rules.
An example: the same server, two years
Say you wait tables for the same restaurant in 2025 and 2026, and guests tip you $16,000 each year.
For 2025, your W-2 shows the $16,000 in box 7, Social security tips. You use that amount, or the total of your Forms 4070, on Schedule 1-A.
For 2026, your W-2 shows $16,000 in box 12 with code TP, and 102, the code for wait staff, in box 14b. You use those two boxes on Schedule 1-A.
Either year, the deduction is $16,000 if your income is under the $150,000 line and the tips were ones guests chose. Social Security and Medicare still apply both years.
What 2026 changes
Starting with 2026, the W-2 shows tips in box 12 with code TP and the occupation code in box 14b. The 1099s show tips separately too.
That makes the 2026 deduction easier to prove, as long as payroll is set up to fill in those boxes correctly.
Bring the forms for the year you're asking about, and on the free 30-minute call we sort out which year's rules apply. We'll check if your tips qualify and set up your records.