For tax years 2025 through 2028, you can deduct up to $25,000 of qualified tips from your federal taxable income. Rideshare drivers and delivery drivers are on the IRS list of jobs that qualify, and that includes drivers who work through an app.
Who qualifies
- Your job is on the list. The IRS list of tipped occupations includes "taxi and rideshare drivers and chauffeurs" and "goods delivery people". The final rules, issued in April 2026, say app and platform drivers are covered. The list is closed: jobs that aren't on it don't qualify.
- The tip was voluntary. The customer chose to tip and chose the amount. A fee the app requires isn't a tip, even if it's called one.
- The tips are reported to you on a tax form. From 2026, only tips shown in the tips box of a 1099 from the app (or on your W-2) count. The box is labeled "cash tips", but it covers tips customers add in the app too. Cash a customer hands you can't be deducted by a self-employed driver, because no form reports it. For 2025 only, the IRS let drivers use the app's earnings reports, tip summaries and their own records instead.
- You have a Social Security number valid for work, and if you're married, you file a joint return. Married filing separately can't claim it.
- Your income isn't too high. The deduction shrinks by $100 for each $1,000 of modified adjusted gross income over $150,000 ($300,000 for joint filers).
The rule for self-employed drivers
As an independent contractor, your tips deduction can't be more than your net profit from driving, worked out before the tips deduction. If your Schedule C shows a loss, the tips deduction is zero. Your business costs, like mileage, still come off your profit first.
What it doesn't change
- Self-employment tax still applies. Tips are still part of your business income, so the 15.3% for Social Security and Medicare is figured on them as usual. The deduction only lowers income tax.
- Tips are still income. Report them with the rest of your pay on Schedule C, then take the deduction on the new Schedule 1-A. You can claim it whether or not you itemize.
- State taxes may not follow. Many states haven't adopted the deduction, so your tips may still be taxed on your state return.
An example
Say a delivery driver's profit after mileage and other costs is $30,000, and $6,000 of their pay was tips reported by the app. They deduct the $6,000 on Schedule 1-A, so their income tax is figured on $6,000 less. In the 12% bracket that saves about $720. Self-employment tax is still figured on the full $30,000.
Keep track of your tips
When your forms arrive, check that each app shows your tips separately, and compare the total with your own log. If a number looks wrong, ask the app for a corrected form before you file. Gigstrak lets you log tips apart from your other pay and includes the tips deduction in your tax estimate. Get Gigstrak on Google Play.
See also: 1099 forms for gig drivers and quarterly estimated taxes.
Sources
IRS: What the No Tax on Tips deduction means for you, Schedule 1-A, Additional Deductions, and the list of tipped occupations. Final regulations: Federal Register, April 13, 2026. This guide is general information, not tax advice.