Qualified tips

Source Credit

(a) In general
There shall be allowed as a deduction an amount equal to the qualified tips received during the taxable year that are included on statements furnished to the individual pursuant to section 6041(d)(3), 6041A(e)(3), 6050W(f)(2), or 6051(a)(18), or reported by the taxpayer on Form 4137 (or successor).
(b) Limitation
(1) In general
The amount allowed as a deduction under this section for any taxable year shall not exceed $25,000.
(2) Limitation based on adjusted gross income
(A) In general
The amount allowable as a deduction under subsection (a) (after application of paragraph (1)) shall be reduced (but not below zero) by $100 for each $1,000 by which the taxpayer's modified adjusted gross income exceeds $150,000 ($300,000 in the case of a joint return).
(B) Modified adjusted gross income
For purposes of this paragraph, the term "modified adjusted gross income" means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933.
(c) Tips received in course of trade or business
In the case of qualified tips received by an individual during any taxable year in the course of a trade or business (other than the trade or business of performing services as an employee) of such individual, such qualified tips shall be taken into account under subsection (a) only to the extent that the gross income for the taxpayer from such trade or business for such taxable year (including such qualified tips) exceeds the sum of the deductions (other than the deduction allowed under this section) allocable to the trade or business in which such qualified tips are received by the individual for such taxable year.
(d) Qualified tips
For purposes of this section—
(1) In general
The term "qualified tips" means cash tips received by an individual in an occupation which customarily and regularly received tips on or before December 31, 2024, as provided by the Secretary.
(2) Exclusions
Such term shall not include any amount received by an individual unless—
(A) such amount is paid voluntarily without any consequence in the event of nonpayment, is not the subject of negotiation, and is determined by the payor,
(B) the trade or business in the course of which the individual receives such amount is not a specified service trade or business (as defined in section 199A(d)(2)), and
(C) such other requirements as may be established by the Secretary in regulations or other guidance are satisfied.
For purposes of subparagraph (B), in the case of an individual receiving tips in the trade or business of performing services as an employee, such individual shall be treated as receiving tips in the course of a trade or business which is a specified service trade or business if the trade or business of the employer is a specified service trade or business.
(3) Cash tips
For purposes of paragraph (1), the term "cash tips" includes tips received from customers that are paid in cash or charged and, in the case of an employee, tips received under any tip-sharing arrangement.
(e) Social security number required
(1) In general
No deduction shall be allowed under this section unless the taxpayer includes on the return of tax for the taxable year such individual's social security number.
(2) Social security number defined
For purposes of paragraph (1), the term "social security number" shall have the meaning given such term in section 24(h)(7).
(f) Married individuals
If the taxpayer is a married individual (within the meaning of section 7703), this section shall apply only if the taxpayer and the taxpayer's spouse file a joint return for the taxable year.
(g) Regulations
The Secretary shall prescribe such regulations or other guidance as may be necessary to prevent reclassification of income as qualified tips, including regulations or other guidance to prevent abuse of the deduction allowed by this section.
(h) Termination
No deduction shall be allowed under this section for any taxable year beginning after December 31, 2028.

History

(Added Pub. L. 119–21, title VII, §70201(a), July 4, 2025, 139 Stat. 170.)

Editorial Notes

Editorial Notes

Prior Provisions
A prior section 224 was sucessively renumbered section 225, then 226, of this title by Pub. L. 119–21, title VII, §§70201(a), 70202(a), July 4, 2025, 139 Stat. 170, 174.

Statutory Notes and Related Subsidiaries

Effective Date
Section applicable to taxable years beginning after Dec. 31, 2024, see section 70201(j) of Pub. L. 119–21, set out as an Effective Date of 2025 Amendment note under section 45B of this title.

Published List of Occupations Traditionally Receiving Tips
Pub. L. 119–21, title VII, §70201(h), July 4, 2025, 139 Stat. 173, provided that: "Not later than 90 days after the date of the enactment of this Act [July 4, 2025], the Secretary of the Treasury (or the Secretary's delegate) shall publish a list of occupations which customarily and regularly received tips on or before December 31, 2024, for purposes of section 224(d)(1) of the Internal Revenue Code of 1986 (as added by subsection (a))."