The OBBBA temporarily allows employees through 2028 to deduct up to $25,000 annually of qualified tip income from their taxable wages. However, there are stipulations. The tips must be reported correctly on the W-2 and married filers must file jointly. There is a MAGI phaseout set forth for single filers and married filing jointly. This deduction is only for occupations that are listed by the IRS as customarily and regularly receiving tips prior to 2025. Additionally, self-employed individuals of Specified Service Trade or Business under Section 199A are not eligible and neither are employees of an SSTB.
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