No Tax on Tips 2026: OBBBA $25,000 Deduction for Gig Workers
Last updated: June 2026 · By Ethan Blake · ~5 min read · 1,400 words
2026 Tax Summary — OBBBA No Tax on Tips
Under the One Big Beautiful Bill Act 2026, tips received by gig workers are excluded from federal income tax up to $25,000. Self-employment tax (15.3%) still applies to tips. Report tips separately on your return to claim the deduction.
The OBBBA 2026 created the largest new deduction for gig workers in a decade. Delivery drivers, rideshare drivers, and service workers who receive tips can exclude up to $25,000 from federal income tax — but must report tips correctly on Schedule C to qualify.
OBBBA 2026 NEWUp to $25,000 excludedTips still subject to SE taxUpdated June 2026
OBBBA 2026 — Effective for Tax Year 2026 The No Tax on Tips provision applies to tips received in calendar year 2026. You must be in a tip-qualifying occupation (service, delivery, hospitality). Tips from DoorDash, Uber Eats, Instacart, and rideshare platforms qualify.
Tax Deductions for Gig Workers Under OBBBA Tips Deduction 2026
Tips ExclusionUp to $25,000
Tips received from customers excluded from federal income tax under OBBBA 2026. Still subject to SE tax.
Mileage$0.725/mile
All business miles deductible separately from the tips exclusion. Stack both deductions.
Phone & DataBusiness %
Proportion of monthly plan used for delivery apps, navigation, and customer contact.
Hot Bags & Equipment100%
Insulated bags and delivery equipment used exclusively for work.
Parking & Tolls100%
All parking fees and tolls paid during business trips are fully deductible.
Health Insurance100%
Self-employed health insurance premiums above the line on Schedule 1.
SE Tax Deduction50% of SE tax
Deduct half your SE tax including SE tax on tips from gross income on Schedule 1.
QBI DeductionUp to 20%
Qualified Business Income deduction made permanent by OBBBA 2026 — up to 20% of net profit.
Key Takeaways
- Tips up to $25,000 excluded from federal income tax under OBBBA 2026
- SE tax (15.3%) still applies to tips — only income tax is excluded
- Must be in a qualifying tip occupation: delivery, rideshare, food service, hospitality
- Report all tips on Schedule C — do not omit tips to claim the exclusion
- Stack with mileage deduction: 10,000 miles = $7,250 additional deduction
- QBI deduction also made permanent by OBBBA — up to 20% of net profit
Frequently Asked Questions
Who qualifies for the OBBBA No Tax on Tips deduction?
Gig workers in tip-qualifying occupations including delivery drivers (DoorDash, Uber Eats, Instacart), rideshare drivers (Uber, Lyft), and food service workers. Tips must be received from customers — platform bonuses do not qualify as tips.
How much can I exclude under the No Tax on Tips provision?
Up to $25,000 of tips received in 2026 are excluded from federal income tax. Self-employment tax (15.3%) still applies to tip income. The exclusion applies only to the federal income tax portion.
Do I still report tips on Schedule C?
Yes. You must report all tip income on Schedule C. The exclusion is claimed as a deduction against income — not by omitting tips from your return. Failing to report tips can trigger IRS penalties.
Can I claim both the tips exclusion and mileage deduction?
Yes — these are completely separate deductions. A DoorDash driver with $5,000 in tips and 10,000 business miles can exclude the $5,000 in tips and also deduct $7,250 in mileage on the same Schedule C.
What counts as a tip for OBBBA purposes?
Tips voluntarily paid by customers for services rendered. This includes in-app tips on DoorDash, Uber Eats, and Instacart. Platform bonuses, promotions, and surge pay are not tips and do not qualify for the exclusion.
About the Author
EB
Ethan Blake
Small Business Tax & Compliance Expert
Writes about 1099 tax deductions, self-employment tax, and IRS rules for independent contractors and freelancers.