How to Find Tip Totals for the “No Tax on Tips” Deduction

Background

The One Big Beautiful Bill (aka, OB3) “no tax on tips” rule may let you claim a federal income tax deduction for certain tip income on your 2025 – 2028 tax return. The IRS has some strict rules for this and not every occupation that receives tips will be eligible for the tax deduction. While many refer to this as no tax on tips, it actually means that eligible workers in certain industries can get a tax deduction based on their tipped wages when filing their yearly 1040.  Check out our blog article, “No Tax on Tips – How Payroll is Affected,” for more information. 

Because the One Big Beautiful Bill has many changes required in reporting, the IRS has granted employers a provide penalty relief for tax year 2025 for information reporting on tips for employers. That means your employer is not required to give you additional reports to other than the W-2 required each year.  Starting in 2026 through year 2028, your W-2 will reflect the required reporting. 

Step 1: Confirm you are eligible for the tipped tax deduction

In general, you may qualify if:

1. You receive “cash tips” from customers.
   These are voluntary amounts a customer chooses to leave, in cash, on a credit card, for the service you provided. Service charges and auto gratuities are NOT tips and not eligible for the tax deduction. Check out our help article about the difference, “Tips vs. Auto-Gratuities (Service Charges): Why It Matters for Payroll.”
   
2. Your job is in a tipped occupation.
   The Department of Treasury keeps a list of jobs that “customarily and regularly” receive tips, and each one has a special code called a Treasury Tipped Occupation Code (TTOC). This list includes jobs like servers, bartenders, hotel staff, salon and spa workers, rideshare and taxi drivers, casino workers, and similar roles where tips are a normal part of pay.
   
   You don’t need to know your exact TTOC code yourself or put it on your income tax returns. Your job title and duties are what really matter. If you are unsure whether your role is on the tipped occupation list, you can view the list  here, or talk with a tax professional.  If the occupation isn’t on the official IRS/Treasury list, tips may not qualify–even if you actually receive them.
   
3. Your tips are properly reported.
   Your tips are either:
   • Reported to your employer and included on your pay stubs and Form W 2,
     –or–
   • Reported on your tax return if you had additional tip income– these are NOT listed on your W-2 or in your payroll records.
     
4. You meet the basic tax rules.
   You’ll need a Social Security number to claim this deduction. You also need to be under the income phaseout range to qualify for the full $25,000: up to $150,000 in modified adjusted gross income if you file single, or up to $300,000 if you’re married filing jointly.
   
   One important catch: if you are married filing separately, you cannot claim the tipped deduction at all.
   
   If your income is above those thresholds, you may still qualify for a partial deduction, since the amount phases down gradually as your income increases.

Once you know you are in a tipped role and you have reported tip income, the next step is figuring out how much tip income you had. That is where your Patriot employee portal comes in. If you receive cash tips at work and they are processed through payroll, you can use your Patriot employee portal to see your reported tip totals for the year. 

You will need this total when you or your tax preparer fills out your 2025 tax return.

Step 2: Gather your records 

You can use either of these two methods to find your tipped amount from your payroll records in My Patriot.
A. From the W-2 (the easiest way!) – If your employer reports tips on your Form W-2 in Box 7 that is a solid and often easiest source of your tip totals. However, because the new ‘no tax on tips’ deduction is so recent, some employers may not yet label or separate ‘qualified tips’ specifically, so Box 7 might not always reflect what will count for the deduction. Talk to your employer if you feel your tipped amount is too low to find out how tips were reported in payroll.

1. Log in to www.mypatriot.com in your browser.
2. Go to the side navigation My Info > W-2s
3. Set the year from the dropdown, example, 2025.
   • If you don’t see the year you’re looking for, please contact your employer. Patriot can’t add or update W-2s for you, since your employer is the one who must create them in their software account.
4. The W-2 will download to your computer wherever you have downloads going. 
5. Click the download link to open the file.
6. Your total reported tipped wages for the year recorded in payroll is located in Box 7 of your W-2 (called Social Security Tips). 

B. From the payroll history report – If you haven’t received your W-2 from your employer yet, you can total up your reported qualified tips from your payroll history report, adjust the dates for the entire year as needed. First, be sure you know what qualified tips were called in payroll as designated by your employer/payroll team.

• Log in to www.mypatriot.com in your browser.
• Go to the side navigation Reports > Payroll History
• Enter the start and end dates for the year, ex: 1/1/2025 – 12/31/2025
• Group by “Totals”
• Click “Run Report”
• All totals for the year will display
• Look any entry that shows your tips. You are looking for the total tips that were run through payroll for the year, so add all of the tipped totals together as your annual reported tips. Once again, ask your employer for all money types used in payroll that are qualified tips so you aren’t guessing. Depending on how your employer set things up, this might be labeled something like:
  • Tips-owed
  • Tips – Already Paid
  • Cash Tips Reported
  • Credit card tips, etc.
• Download the report by clicking the “Download PDF” link.

This report is your starting point for the tipped tax deduction, based on tips that were actually reported to your employer through Patriot. Of course, if you have had more than one employer, make sure you are adding all tips across all employers together for your income tax return.

Step 3: Apply the annual cap and income limits

After you total your qualified tipped wages for 2025, enter that amount in your tax software or share it with your tax professional. They will apply the income-based phaseout using your modified adjusted gross income (MAGI), following the 2025 Form 1040 instructions. The detailed phaseout calculation lives in those instructions and should already be built into reputable consumer tax software.

Quick recap on the annual limit: You can use up to $25,000 of qualified tipped wages, with the deduction phasing out as MAGI approaches $150,000 for single filers and $300,000 for joint filers.

Step 4: Keep your records

While the IRS has allowed a “reasonable estimation”  for this year, don’t forget to hang on to:

• A PDF of your Pay History report for 01/01/2025 through 12/31/2025
• Any personal tip log or diary you keep
• Form 4137
• Your Form W 2 from each employer where you received tips

If the IRS or your tax preparer asks how you got your tip total, these are the documents you will rely on.

Need more help?

This article is general information, not personal or legal tax advice and may not apply to your specific situation.  If you have more questions, it is a good idea to talk with a tax professional.  Bring all of your payroll and tax records from this year and last so they can be informed in their help for you.

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