Which New Yorkers Qualify For No Tax On Tips?

As employers are sending out tax info, many New Yorkers are getting ready to file their 2025 tax returns. The 'One Big Beautiful Bill' offers some tax relief for certain New Yorkers. Tip workers are now able to deduct $25,000 in tips from their taxable income each year. Garrett Watson of the Tax Foundation told NPR, "If you look at the data on tipped income, that would cover the majority of individuals earning tips in the United States. So, it's still pretty generous for most workers."

However, the Executive Director at the Yale Budget Lab, Martha Gimbel, says it won't benefit low-income tip workers in New York very much, since they already don't pay that much in taxes.

"Very low income Americans are not going to benefit from this, largely because they already have little to no taxable income. And so what you are largely seeing is that this provision will benefit people who are in the middle, upper-middle income brackets."

What New Yorkers Need To Know About No Tax On Tips

According to IRS.gov, employees and New Yorkers who are self-employed can deduct tips. This applies to wait staff, bartenders, salon workers, personal trainers, gig economy workers, and others who regularly receive tips. Deductions can be deducted from qualified tips included on Form W-2, Form 1099-NEC, Form 1099-MISC, Form 1099-K, or Form 4137.

- “Qualified tips” are voluntary cash or charged tips received from customers or through tip sharing
- Maximum annual deduction is $25,000; for self-employed, deduction may not exceed individual’s net income, without regard to this deduction, from the trade or business in which the tips were earned.
- The deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers)

You can find more information here.

*** This article is not intended to provide tax advice

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