Yes. As of September 28, 2026, gig tips still count as income. For 2025 through 2028, eligible workers may deduct qualified tips for federal income tax. Self-employed drivers need qualifying tips included on a furnished information return, such as a 1099, and supporting records. The deduction does not remove self-employment tax. See the IRS reporting guidance.
What does “no tax on tips” actually change?
It creates a deduction for qualified tips. The deduction does not exclude tip income from reporting.
For a self-employed driver, tips generally form part of the business’s gross receipts on Schedule C. The IRS treats those tips as business income subject to self-employment tax. Reporting tip income and establishing eligibility for the separate federal deduction are different questions. A tax professional can apply the requirements to the records.
A missing 1099 does not change the reporting duty. The IRS gig-worker guidance says to report gig income even without an information return, including cash payments. Reporting income yourself, however, does not by itself establish eligibility for the tip deduction.
What makes a payment a qualified tip?
Start with the payment, not the platform’s name. Under the IRS final-regulations summary, qualified tips must come from customers voluntarily, without negotiation. They must be paid in cash or an accepted cash-equivalent medium, which includes card and cash-denominated mobile payments. A non-optional service charge is not a qualified tip.
Platform base pay and incentives do not become tips because they appear beside tips in your earnings screen. If a platform tops up a payment or uses an unclear label, ask your tax professional to review what the payment actually represents.
Your work must also fall within an eligible occupation. The IRS occupation list includes taxi and rideshare drivers and chauffeurs, plus goods delivery people. Its delivery examples include grocery, package, and app-based delivery. Those entries do not establish that every payment from a delivery or rideshare app qualifies.
For self-employed workers, the IRS reporting rules require the tips to appear on a furnished information return, such as Form 1099-NEC, 1099-MISC, or 1099-K. Keep records that support the amount. The same guidance describes Form 4137 as an employee reporting route, not a general fix for independent contractors with unreported cash tips.
What if my form does not list tips separately?
Check the tax year before following advice about a missing tip breakdown.
| Tax year | Reporting situation | What to check |
|---|---|---|
| 2025 | Your 1099 includes tips in its total but has no separate tip amount. | Notice 2025-69, section III.A.2, allows supporting records to establish the tip portion. Other eligibility conditions still apply. |
| 2026 | Payors must separately report tips and the recipient’s occupation code. | Compare the statement with your records under the current IRS reporting guidance. Ask the payor and your tax professional about missing or incorrect entries. Do not assume the 2025 relief applies. |
| Either year | You received no 1099, or direct cash tips are absent from it. | Missing information returns do not remove the IRS income-reporting requirement. A tax professional can review how to report the income and whether the deduction’s information-return requirement can be met. A personal tip log alone does not settle that question. |
The 2025 relief concerns a missing separate breakdown, not permission to deduct tips omitted from the form’s total. This draft does not verify final 2026 form-box instructions or a remedy for missing information returns. Those points need tax-pro review before you rely on a filing procedure.
Which limits can reduce the deduction?
The IRS lists these limits and filing conditions:
- The maximum annual deduction is $25,000 per return, not per company or per spouse.
- The deduction begins to phase out above modified adjusted gross income of $150,000, or $300,000 for joint filers. Your tip total alone does not determine this income figure.
- For self-employed workers, the deduction cannot exceed net income from the business where the tips arose, before this deduction.
- You must include a Social Security number valid for employment. Married taxpayers must file jointly to claim the deduction.
You can claim it with either the standard deduction or itemized deductions if you meet the requirements. The maximum is a limit, not an amount every tipped driver receives.
What records should I keep outside Orphie?
Keep each platform’s statements and tip breakdowns, your information returns, and the receipts or transaction histories that support your tip total. Record direct cash tips separately so they do not disappear from your income records. A daily tip log can help explain amounts, but it does not replace the deduction’s information-return requirement. Notice 2025-69 names earnings statements, receipts, daily tip logs, and payment-platform records as possible support for the 2025 calculation.
Bring your information returns, platform statements, tip records, and business-expense records to your CPA or another qualified tax professional. Ask them to reconcile the income, decide which tips meet the reporting and eligibility requirements, apply the deduction limits and current transition rules, and check your state’s treatment.
This is general recordkeeping information, not tax advice. Ask a tax professional about your own return.
