No Tax on Tips started with the 2025 tax year. The law was signed on July 4, 2025, but it covers qualified tips received any time from January 1, 2025, including the months before it passed. Workers first claimed it on their 2025 federal returns in the 2026 filing season, and it runs through the 2028 tax year.
| Date | What happened or happens |
|---|---|
| January 1, 2025 | Tips received from this date count toward the deduction |
| July 4, 2025 | The One, Big, Beautiful Bill Act, including No Tax on Tips, becomes law |
| November 21, 2025 | IRS Notice 2025-69 explains how to figure 2025 tips without new W-2 boxes |
| 2026 filing season | First claims, on Schedule 1-A attached to 2025 Forms 1040 |
| Tax year 2026 | Deduction continues; 2026 Forms W-2 add Box 12 code TP and Box 14b |
| December 31, 2028 | Last day tips can count, unless Congress extends the law |
| 2029 filing season | Last returns that can claim it (2028 tax year) |
Did No Tax on Tips pass?
Yes. It was enacted on July 4, 2025 as part of the One, Big, Beautiful Bill Act (Public Law 119-21). The IRS now also refers to the law as the Working Families Tax Cuts. The tips provision is section 70201, which created a new deduction in section 224 of the tax code.
Is No Tax on Tips in effect now?
Yes. It applies to the 2025, 2026, 2027, and 2028 tax years. If you earn qualified tips in 2026, you'll deduct them on the 2026 return you file in 2027. It works the same way as in 2025: up to $25,000 of qualified tips per return, phasing out above $150,000 of modified adjusted gross income ($300,000 for joint filers).
Why were my tips still taxed on my paycheck?
Because it's a deduction you claim when you file, not a payroll exemption. Employers still withhold income tax and the 7.65% employee Social Security and Medicare tax on reported tips. The income tax benefit shows up on your return, as a bigger refund or a smaller balance due. The Social Security and Medicare tax never goes away. If you'd rather see the benefit during the year, the IRS Tax Withholding Estimator (https://www.irs.gov/individuals/tax-withholding-estimator) has been updated for the new deductions and can help you decide whether to adjust your Form W-4.
Do tips from before July 4, 2025 count?
Yes. The deduction applies to the whole 2025 tax year, so qualified tips from January through June 2025 count the same as tips received after the law passed.
How the 2025 claim worked without new W-2 boxes
2025 Forms W-2 didn't have a separate line for qualified tips, so in Notice 2025-69 the IRS let workers figure their tips from what they already had: Social Security tips in W-2 Box 7, tips reported on Form 4137, and their own tip records. Self-employed workers whose 1099-K or 1099-NEC didn't break out tips could rely on daily tip logs. Starting with 2026 Forms W-2, employers report total cash tips in Box 12 with code TP and the worker's Treasury Tipped Occupation Code in Box 14b.
When does No Tax on Tips end?
The deduction is written for tax years 2025 through 2028 only. Tips received after December 31, 2028 won't qualify unless Congress extends or changes the law. Until then, the rules stay the same each year: up to $25,000 of qualified tips, a valid Social Security number, joint filing if married, and an occupation on the Treasury list.
What hasn't changed
- Tips are still income and still go on your W-2 or 1099.
- Social Security and Medicare tax still applies to all tips.
- Report tips of $20 or more a month to your employer by the 10th of the following month.
- State income tax depends on your state. The federal deduction doesn't decide it.
For the full eligibility rules and phase-out math, see our guide to how No Tax on Tips works, or estimate your savings with the No Tax on Tips calculator.
When does No Tax on Tips start?
It applies starting with the 2025 tax year, covering qualified tips received from January 1, 2025, even though the law was signed July 4, 2025. The first claims were made on 2025 tax returns filed in 2026.
Is No Tax on Tips in effect for 2026?
Yes. It covers tax years 2025 through 2028, so tips received in 2026 can be deducted on the 2026 return you file in 2027.
When does No Tax on Tips expire?
After the 2028 tax year. Tips received after December 31, 2028 won't qualify unless Congress extends the deduction.
Why is tax still taken out of my tips?
No Tax on Tips is a deduction claimed on your return, not a payroll exemption. Employers still withhold on tips, and Social Security and Medicare tax still applies. The income tax savings come when you file.
Can I claim No Tax on Tips for tips from early 2025?
Yes. The deduction covers the entire 2025 tax year, including tips received before the law was enacted on July 4, 2025.
This article is general information, not tax advice. Dates were checked against IRS Notice 2025-69, IRS Working Families Tax Cuts guidance, and the 2026 Form W-2 instructions in October 2026.