Can I claim the No Tax on Tips deduction with a side job? Yes, you can claim the No Tax on Tips deduction for side jobs and freelance work — it lets you deduct up to $25,000 of qualified tips per year (for self-employed work, the deduction is capped at the net income of that tipped business), but the deduction phases out above $150,000 Modified Adjusted Gross Income (MAGI) for single filers and $300,000 for married filing jointly, starting from tax year 2025.
What Types of Side Jobs Qualify for the No Tax on Tips Deduction?
The No Tax on Tips deduction applies to occupations on the Treasury Tipped Occupation Code (TTOC) list, including servers, bartenders, hairstylists, and ride-sharing drivers. Separately, federal rules require employees to report cash tips of $20 or more in a month to their employer in a signed written statement by the 10th of the following month. Form 8027 is used by large food and beverage establishments to report tips, but it's not directly related to the No Tax on Tips deduction. According to the IRS, only large food or beverage establishments must file Form 8027 — those with more than 10 employees on a typical business day in the prior year; there is no dollar threshold (irs.gov/forms-pubs/about-form-8027).
IRS Publication 531 explains that tipped employees must report tips of $20 or more in any calendar month to their employer in a signed written statement by the 10th day of the following month (irs.gov/publications/p531). You can use IRS Form 4137 to report tips you didn't report to your employer (including allocated tips from W-2 Box 8) so the Social Security and Medicare tax on them is calculated — Form 4137 never claims a credit.
- Servers
- Bartenders
- Hairstylists
- Ride-sharing drivers
How Do I Claim the No Tax on Tips Deduction on My Tax Return?
You'll claim the deduction on Schedule 1-A (Form 1040), available whether or not you itemize. Form 4137 is a separate form used to calculate the Social Security and Medicare taxes on unreported tip income. Check the IRS website for detailed instructions on claiming the No Tax on Tips deduction on Schedule 1-A (Form 1040).
For example, let's say you received $30,000 in tips from a side job in 2025, and you reported $20,000 of those tips to your employer. You can claim the No Tax on Tips deduction on Schedule 1-A (Form 1040), which would reduce your federal income tax liability. However, FICA (7.65%) still applies to tips.
Here's a table summarizing the key differences between the No Tax on Tips deduction and the FICA tip credit:
| Deduction | FICA Tip Credit |
|---|---|
| Reduces federal income tax only | An employer income-tax credit for the employer's share of FICA taxes on reported tips, claimed on Form 8846 |
| No Tax on Tips deduction applies to tax years 2025–2028 | The FICA tip credit is a long-standing credit available in 2025 and prior years |
| Phases out above $150,000 MAGI for single filers and $300,000 for married filing jointly | No phase-out limit |
The information provided in this article is for informational purposes only and should not be considered tax advice. You should consult the IRS and a tax professional to ensure compliance with tax laws and regulations.
No Tax on Tips IRS Approved Job List: The Treasury Tipped Occupation Codes
The IRS approved job list for the No Tax on Tips deduction is the Treasury Tipped Occupation Code (TTOC) list — 71 three-digit codes across 8 categories (101–810) covering occupations that were customarily tipped on or before December 31, 2024. The IRS list was most recently updated June 28, 2026, when it added code 509 (Visual artists), 510 (Floral designers), and 810 (Gas pump attendant). Your tips qualify only if your occupation appears on this list.
- 101 Bartenders — one of the most common codes for side-job tip earners
- Other food and beverage codes covering servers, waiters, and counter staff
- Beauty and personal service codes for hairstylists, barbers, nail technicians, and estheticians
- Transportation codes for ride-sharing and taxi drivers
- New for 2026: 509 Visual artists, 510 Floral designers, 810 Gas pump attendant
Starting with 2026 Forms W-2, your employer reports your qualifying occupation in Box 14b using up to two TTOC codes. If any of your tips came from a non-qualifying occupation, the employer also enters code 000. When you file, you claim the deduction — up to $25,000 of qualified tips for tax years 2025–2028 — on Schedule 1-A (Form 1040), available whether or not you itemize. Check the current list on the IRS website before filing, because Treasury can update it.
Frequently asked questions
Can I claim the No Tax on Tips deduction with a side job?
Yes, you can claim the No Tax on Tips deduction for side jobs and freelance work — it lets you deduct up to $25,000 of qualified tips per year (for self-employed work, the deduction is capped at the net income of that tipped business), but the deduction phases out above $150,000 Modified Adjusted Gross Income (MAGI) for single filers and $300,000 for married filing jointly, starting from tax year 2025.
What types of side jobs qualify for the No Tax on Tips deduction?
The No Tax on Tips deduction applies to occupations on the Treasury Tipped Occupation Code (TTOC) list, including servers, bartenders, hairstylists, and ride-sharing drivers. Separately, federal rules require employees to report cash tips of $20 or more in a month to their employer in a signed written statement by the 10th of the following month.
How do I claim the No Tax on Tips deduction on my tax return?
You'll claim the deduction on Schedule 1-A (Form 1040), available whether or not you itemize. Form 4137 is a separate form used to calculate the Social Security and Medicare taxes on unreported tip income.
Where is the IRS approved job list for the No Tax on Tips deduction?
The IRS publishes the Treasury Tipped Occupation Code (TTOC) list on irs.gov — 71 three-digit codes in 8 categories (101–810), updated June 28, 2026. Your occupation must be on the list, and it must have been customarily tipped on or before December 31, 2024, for your tips to qualify.