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in US
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New tax deduction on tips

We help tipped workers access transaction records needed for the federal income tax deduction on tips
(commonly referred to as “No Tax on Tips”)

Are Tips Taxable in the US?

Yes, but with a major benefit. As of 2025, the OBBB Act creates a new deduction for tipped workers. While often called “No Tax on Tips,” it is specifically a federal income tax deduction up to $25,000 of tips received.


The Requirement:
While 2025 was a transition year, based on current IRS guidance for 2026, to claim this deduction, tips generally need to be officially reported to the employer and included on the W-2.

Tipped employees who receive $20 or more in tips per month are generally required to report those tips to their employer.

OBBB "No Tax on Tips Act"
How we can help
We keep tips records for employees
We provide tipped workers a clear view of all tips received through the Take it Personally (tiP) app, creating a verified digital trail for accurate record-keeping. The transaction records accessible anytime, streamlining compliance without cash hassles.
Optional payroll integration for hotels
For hotels that want to streamline compliance, we offer integration option that can help facilitate tip reporting to payroll systems. This can help housekeepers qualify for the federal income tax deduction and reduce paperwork for hotels.

Reporting digital tips

With the Take it Personally (tiP) platform, tips are paid directly to the employees for whom they were intended by the guests. We maintain transaction records that tipped workers can access anytime through the app.

Understanding reporting obligations

For Housekeepers

Understanding reporting obligations
Based on current IRS guidance, it is employees responsibility to report their tips to the employer.

Why reporting matters
Tips that are reported and included on your W-2 may qualify for the federal income tax deduction (up to $25,000 annually). Additionally, when tips are reported on your W-2, your official documented income is higher, which can help when applying for car loans, renting apartments, or getting a mortgage.

  • Self-Reporting: employees who receive $20 or more in tips per month are generally expected to report those tips to their employer. The specific process and timing may vary by employer. For your convenience, you can view a full record of your tips in our app.
  • Optional Auto-Reporting: Some employers use our platform’s payroll integration feature to automatically receive tip data for payroll purposes. If your employer has enabled this feature, your monthly tip totals will be shared with their payroll team to facilitate W-2 reporting.

For Hotels

Understanding employer responsibilities
Based on current IRS guidance, employers have obligations regarding tip reporting and withholding when employees report tips. The “No Tax on Tips” federal income tax deduction can be a significant benefit for your team, but it typically requires tips to be reported and properly classified on the W-2.

Based on current IRS guidance, employers may be able to stop withholding federal income tax on the first $25,000 of reported tips once the employee updates their W-4, but must continue to withhold other applicable taxes on all tips.

  • Self-Reporting: When employees report tips to the employer (via Form 4070 or internal systems), employers are generally required to retain employee tip reports for at least 4 years.
  • Optional Auto-Reporting: We offer optional payroll integration features that can help facilitate tip reporting for payroll purposes. Our system can provide monthly tip data in a simple, clean format that works with your existing payroll processes.

Benefits of Accurate Tip Reporting

For Housekeepers

  • Access to federal income tax deduction (up to $25,000)
  • Higher documented income: When tips are reported on your W-2, your official income is higher. This helps immensely when applying for car loans, renting apartments, or getting a mortgage.

For Hotel

  • Improved employee retention and satisfaction. You are offering your team a tool that helps them to increase income and maximize their legal tax benefits.
  • Reduced compliance risk
  • Streamlined payroll processes

Important Notes

Tax laws are complex and evolving: The information on this page is based on our current understanding of the OBBB Act and existing IRS regulations as of January 2026. Tax laws and IRS guidance are subject to change.

Individual circumstances vary: The specific tax treatment of tips depends on individual circumstances, employment status, and other factors.

Seek professional guidance: For official tax guidance, visit IRS.gov or consult with a qualified tax professional who can advise on your specific situation.

Disclaimer: Take it Personally LLC and its affiliates do not provide tax, legal, or accounting advice to employers or employees who utilize our products or services. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice with respect to any tips or other wages.

Users are solely responsible for determining and complying with their individual tax responsibilities. You should consult your own tax, legal, and accounting advisors regarding your responsibilities associated with tips and other income from your employment. The Company retains transaction records for user convenience and regulatory compliance, but does not assume responsibility for tax withholding, reporting, or remittance on behalf of users.

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