§224 — Title 26 Internal Revenue Code | U.S. Code

Summary

You can deduct qualified tips on your tax return if those tips were reported on certain IRS tip statements or on Form 4137. The deduction cannot be more than $25,000. It is reduced by $100 for each $1,000 your modified adjusted gross income is over $150,000 ($300,000 for a joint return). Modified adjusted gross income means your adjusted gross income plus amounts excluded under sections 911, 931, or 933. If the tips come from your own business (not as an employee), you can only deduct tips to the extent your business’s gross income (including those tips) is more than your business deductions, excluding this tip deduction. Qualified tips are cash tips in jobs that normally get tips on or before December 31, 2024, as the Secretary defines. Tips must be voluntary, set by the payer, not negotiable, not from certain specified service businesses, and meet any other rules the Secretary issues. Cash tips include cash or charged tips and, for employees, tips shared under tip‑sharing arrangements. You must include your Social Security number on the return to claim the deduction, and married people must file jointly. The Secretary will write rules to prevent abuse. No deduction is allowed for tax years beginning after December 31, 2028.

Title 26, §224

Internal Revenue Code — Source: USLM XML via OLRC

(a)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)(1)The amount allowed as a deduction under this section for any taxable year shall not exceed $25,000.

(2)(A)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)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)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)For purposes of this section—

(1)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)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.

(3)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)(1)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)For purposes of paragraph (1), the term “social security number” shall have the meaning given such term in section 24(h)(7).

(f)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)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)No deduction shall be allowed under this section for any taxable year beginning after December 31, 2028.

Notes & Related Subsidiaries

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)).”

§224 Qualified tips

Summary

Title 26, §224

Notes & Related Subsidiaries

Editorial Notes

Prior Provisions

Statutory Notes and Related Subsidiaries

Effective Date

Effective Date

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