Filing taxes? ‘No tax on tips’ provision could affect thousands locally

PINELLAS COUNTY, Fla. — This year when filing taxes, those who receive tips could get more money back in their pocket.

A study from Yale University says about 2.5% of workers are tipped, but in a vacation destination like Pinellas County, the proportion of workers who make the bulk of their income off tips is likely higher.

Bay area tax professional Michael Price with Ralph, Price, McAuliffe & Associates, P.A, said he expects those tipped employees who work more than a shift or two a week could see some significant tax savings this year.

“When you start talking about an extra $7,000 – $8,000 potentially of tax savings for people by not having tax on tips, I think it could add up quite significantly if you’re under the appropriate income thresholds,” he said.

The ‘no tax on tips’ provision that is part of the One Big Beautiful Bill act is a tax deduction, not an exemption. It’s an above the line deduction of up to $25,000 for tips that were properly reported and given voluntarily.

Price said all the information a tipped worker needs will be on their tax documents.

“It’s going to be separately reported on their W-2,” he said. “So when they get their W-2 ,they’ll see the extra boxes where they’ll have a code for their qualified tips that they can put into whatever they use to do their tax preparation.”

Jobs that qualify are those that customarily receive tips, like in the hospitality industry. Jobs like tutoring or fishing charters that received Venmo payments as a ‘thank you’ would not qualify.

The deduction also doesn’t apply to automatic service charges, or mandatory gratuity.

The ‘no tax on tips’ provision won’t benefit all tipped workers. Some part-time servers would earn too little to owe federal income tax on their earnings in the first place.

Staff members at The Frog Pond in downtown St. Pete said they’re filing their taxes and hope they benefit. Owner Raymond Bourque says he hope his staff can get more money back this year given this new provision, and knows his customers prefer their tips going straight to their server.

“If somebody leaves a $10 tip on a $20-$25 dollar ticket… they want to know that $10 will stay with them and not $7 in their pocket and $3 to the federal government,” Borque said.

These tax provisions will remain through the 2028 tax season.