Gig drivers can deduct up to $25,000 of qualified tips from federal income tax for 2025 through 2028, but not more than their net profit. In our example, $11,500 of tips saves $746 of federal income tax. Self-employment tax still applies to tips, and some states, such as California, tax them anyway.
Federal income tax saved in the example.
Show the math
| Gig earningsSchedule C, line 1 | $42,000 |
| Mileage deductionSchedule C, line 9 (72.5¢ and 76¢ a mile) | −$13,745 |
| Other business expensesSchedule C | −$900 |
| Net profitSchedule C, line 31 | $27,355 |
| Self-employment taxSchedule SE (15.3% of 92.35% of profit) | $3,865 |
| Half of self-employment taxSchedule 1 adjustment | −$1,933 |
| Adjusted gross incomeForm 1040 | $25,422 |
| Standard deductionForm 1040 | −$16,100 |
| Tips deductionSchedule 1-A (up to $25,000) | −$11,500 |
| Business income deductionForm 8995 (QBI) | −$0 |
| Taxable incomeForm 1040 | $0 |
| Federal income tax2026 tax brackets | $0 |
| Texas income taxNo state income tax | $0 |
| Total tax | $3,865 |
An estimate for planning, not tax advice. See how we calculate and our verified examples.
Who qualifies
Workers in occupations that customarily received tips before 2025 qualify. The IRS list includes rideshare drivers, app-based delivery drivers and grocery delivery shoppers. Only voluntary tips count: automatic service charges don’t.
Schedule 1-A: the qualified tips deduction rules for self-employed drivers
- Cap: $25,000 of qualified tips per return.
- Net profit limit: the deduction can’t be more than your net profit from the work where you earned the tips.
- Income limit: it shrinks by $100 for each full $1,000 of income above $150,000 ($300,000 married filing jointly).
- Married couples must file jointly.
- Federal income tax only: you still owe 15.3% self-employment tax on tips.
- How to claim: on Schedule 1-A of Form 1040, whether you itemize or not.
No tax on tips for DoorDash, Uber and other apps
Customer tips added in the app count. Base pay, surge, Peak Pay, Quests, Challenges and other promotions don’t. Your platform’s annual summary usually shows tips separately.
State taxes on tips
Many states start from federal adjusted gross income, which the tips deduction doesn’t reduce, so tips are often still taxed at the state level. California has said it won’t allow the deduction. Our state estimates tax tips at the state level, so they may be slightly high in states that do allow it.
More calculators
- 1099 Tax Calculator 2026
- Self-Employment Tax Calculator 2026
- Quarterly Tax Calculator 2026
- Mileage Deduction Calculator 2026
No tax on tips calculator questions
How much is the no tax on tips deduction?
Up to $25,000 of qualified tips per return for 2025 through 2028. For self-employed workers it can’t exceed net profit from the tipped work.
Do gig drivers qualify for no tax on tips?
Yes. Rideshare drivers, app-based delivery drivers and grocery delivery shoppers are on the IRS list of tipped occupations.
Do I still pay self-employment tax on tips?
Yes. The deduction only lowers federal income tax. Self-employment tax of 15.3% still applies.
Does the tips deduction phase out?
Yes. It drops by $100 for each full $1,000 of modified adjusted gross income above $150,000, or $300,000 for married couples filing jointly.