How the business limit works
When tips come through your own business instead of a paycheck, the law adds one more limit: they count only to the extent the business has net income without this deduction. The calculator opens with a rideshare driver who received $9,000 of tips during a year in which the business netted $6,500 after car costs and the deductible half of self-employment tax. Only $6,500 of the tips can count; the other $2,500 is shown under What doesn’t count.
The limit applies business by business. The IRS’s example has the same person tutoring ($500 of tips, $4,500 net income) and driving ($1,800 of tips, $1,000 net income): $500 + $1,000 = $1,500 counts. A business with a loss contributes nothing, and you can’t use one business’s profit to cover another’s tips. If you have several, add up what each can count and enter the total with a matching net income.
Which records the IRS expects for 2026
For 2025, Forms 1099-NEC, 1099-MISC and 1099-K weren’t changed to list tips separately, so you need your own proof: the app’s earnings statement that splits fares and tips, point-of-sale reports or a daily tip log. Only tips inside the totals on those forms can be counted. For 2026 the IRS says the forms will show tips separately.
Other things that change for the self-employed
- Qualified business income. Tips you deduct here are taken out of qualified business income for the separate 20% deduction (section 199A), so the same dollars aren’t deducted twice.
- Specified service businesses. Tips in health, law, accounting, consulting and similar fields don’t qualify. Until final regulations, the IRS treats anyone in a listed occupation as outside those fields.
- Self-employment tax. Still due on your net earnings, tips included.
If you also have a job with tips on a W-2, enter both: the $25,000 cap covers the total.
Transportation and delivery: the Treasury’s tipped occupations
| Code | Occupation | Includes, for example |
|---|---|---|
| 801 | Parking and valet attendants | Parking garage attendant, valet parker |
| 802 | Taxi and rideshare drivers and chauffeurs | Cab driver, personal driver, platform/app-based rideshare driver |
| 803 | Shuttle drivers | Airport shuttle driver, hotel shuttle driver, rental car shuttle driver |
| 804 | Goods delivery people | Pizza delivery driver, grocery delivery driver, floral delivery, bicycle courier, package delivery person, appliance delivery driver, furniture delivery person, app/platform-based delivery person |
| 805 | Personal vehicle and equipment cleaners | Car wash attendant, auto detailer, boat waxer |
| 806 | Private and charter bus drivers | Motor coach bus driver, tour bus driver |
| 807 | Water taxi operators and charter boat workers | Water taxi captain, air boat operator, charter boat deckhand, charter boat steward |
| 808 | Rickshaw, pedicab, and carriage drivers | Horse drawn carriage driver, bike taxi driver |
| 809 | Home movers | Furniture mover, packer, piano mover, art mover |
| 810 | Gas pump attendants | Gas pumper |
From the IRS list of occupations that customarily and regularly received tips on or before December 31, 2024, checked October 18, 2026. The calculator’s occupation menu has the full list.