A wave of new federal income tax-saving opportunities is on the horizon, thanks to the One Big, Beautiful Bill (OBBB, H.R.1, Public Law No. 119-21). These provisions, which will be rolled out over the next four tax years (2025–2028), are envisioned by the current administration as welcome relief for select taxpayers, primarily in the form of the following three deductions:

• Deduction for tip income (“no tax on tips”)
• Deduction for overtime pay (“no tax on overtime”)
• Deduction for interest on certain auto loans

In this SWC blog post, we take a deeper dive into these three tax breaks and explain what you need to do to fully take advantage of them, starting with no tax on tips.

Deduct Tip Income (Up to $25,000)

H.R.1 introduces an above-the-line deduction (up to $25,000) for cash or credit card tips earned in professions in which tipping is the norm. The Department of the Treasury and the Internal Revenue Service published this list of eligible sectors, covering occupations in:

• Beverage and food service (bartenders, waitstaff, dishwashers, etc.)
• Entertainment and events (gambling dealers, dancers, musicians, etc.)
• Hospitality & guest services (concierges, desk clerks, housekeepers, etc.)
• Home services (landscapers, plumbers, handymen, etc.)
• Personal services (personal care and service workers, private event planners, wedding photographers and videographers, etc.)
• Personal appearance and wellness (estheticians, masseuses, tattoo artists, etc.)
• Recreation and instruction (golf caddies, piano teachers, ski instructors, etc.)
• Transportation and delivery (valet parkers, pizza delivery drivers, furniture moves, rideshare drivers, etc.)

For more information, see Treasury, IRS issue guidance listing occupations where workers customarily and regularly receive tips under the One, Big, Beautiful Bill.

Note that this is $25,000 per return, not per taxpayer. So, if you’re married filing jointly (MFJ), and you collectively receive tip income more than $25,000, you can only deduct up to $25,000.

Be Careful: Though the phrase “no tax on tips” sounds like a full exemption, it is actually a deduction, not an income exclusion. You won’t owe federal income tax on the amount of tip income you deduct, but you are required to pay Social Security and Medicare taxes on that income. You may also be required to pay state and local taxes on that income.

Reporting is really important here: Your W‑2s, 1099s, or Form 4137 must clearly identify tip amounts and the profession that generated the tip income you received. And here’s something else you need to know: 2025 forms and withholding tables won’t be updated, but the IRS will issue transitional guidance for what “reasonable” reporting looks like.

If you’re self-employed in a profession in which tipping is the norm, you’re eligible for this tax break, too! However, we’re waiting for Internal Revenue Service (IRS) specifics on how to report tip income via Schedule C.

In any event, you need to be aware of these three limits: Continue reading… Continue reading… Continue reading…