On July 4, 2025, the U.S. government enacted the "One Big Beautiful Bill Act." This legislation includes the "No Tax on Tips Act," a new, temporary provision that allows service professionals to deduct a significant portion of their tip income from their federal taxes.
Key details of the tip deduction:
Who is eligible? The deduction is available for both employees (W-2 workers) and self-employed individuals (1099 workers) in qualifying professions. This includes occupations like hairstylists, barbers, nail techs, estheticians, and massage therapists. To be eligible, your occupation must be on the official list of professions that "customarily and regularly" receive tips, which the IRS is expected to publish by the end of 2025.
What tips are included? You may be able to deduct up to $25,000 of reported tip income per year from your federal taxes (for tax years 2025–2028). This applies to both cash and digital tips.
Important: This law does not change how you report your tips. You are still required to report all tip income, regardless of whether it's cash or digital.How do I claim the deduction? You will claim the deduction when you file your personal federal income tax return for the 2025 tax year (due in early 2026). The deduction is available whether you take the standard deduction or itemize your deductions.
Please note: Booksy does not provide tax or legal advice. This information is for educational purposes only. For personalized advice, please consult a qualified accountant or tax advisor. Nothing changes in how Booksy or Stripe reports your income for tax purposes.