TLDR;

For tax years 2025 through 2028, there is a new federal deduction for tips. Employees and self-employed folks in lines of work that the IRS lists as “customarily and regularly” tipped can deduct up to $25,000 of qualified tips from taxable income. Content creators are included if your work fits the IRS list and your tips are actually tips, not subscriptions or platform payout.

There is a catch for self-employed people. The deduction cannot be more than your net income from the business where you earned the tips. So if you net $18,000 from streaming, you cannot deduct $25,000 of tips. Your cap would be $18,000 dollars.

Who Counts and What Counts

To qualify, your tips have to be voluntary payments from fans or customers. Cash, card, platform currency, and tip shares all count. Think Twitch Bits, YouTube Super Chats, TikTok gifts, direct tips in a chat via PayPal, and similar features that a viewer chooses to send. Automatic service fees or payments that are part of a subscription do not count. Ad revenue share does not count. Brand deals do not count.

There will be an official IRS list of tipped occupations that the agency must publish. If your work falls on that list, you are good to go. The IRS said it would release this list by October 2, 2025, and also offer transition relief for tax year 2025 while everyone adjusts to the new rules. The release of this list has certainly been impacted by the 2025 government shutdown, but preliminary qualifying occupations have been released. Good news: creators are included under "Digital Content Creators" within the Entertainment and Events category!¹

Important Exclusions

Some creators will not be able to take advantage of this deduction even if they get tips. If your business is a Specified Service Trade or Business under section 199A (QBI) where the key asset is your reputation or skill, you are out. That can include high profile creators who earn by endorsing products, licensing their name or likeness, or doing paid appearances. Employees of companies in that type of business are out too.

OnlyFans creators are also excluded for this deduction, as any amount received for pornographic activity is not a qualified tip.

There is also an income phaseout. The deduction starts to phase out once your modified adjusted gross income is over $150,000 if single, or $300,000 if filling jointly. If you are above those numbers, talk to a pro about how much, if any, you can still claim.

What Paperwork Needs to Be Filed

To claim the deduction, your tips must be reported somewhere official. That could be a W-2, a 1099, or on Form 4137 if you are self-reporting tip income. Employers and payers (platforms) will have new reporting rules too. They need to file information returns and give workers statements that show cash tips and the occupation involved. Keep those with your records.

If you receive tips through third party platforms, look for Forms 1099 that report payment activity. The exact mix will depend on how the platform pays you and which thresholds were met, but the theme is the same. The IRS wants a reported trail.

How To Track It

The cleanest setup is to keep tip income tagged separately in your bookkeeping. If your platform lets you export line items, grab those exports every month and save them in a dedicated folder (timestamped). Keep screenshots of creator dashboards that show tip totals and fees deducted. If you ever need to prove that a payment was a fan tip and not a subscription or ad share, that detail will help.

You also want to keep your other revenue streams in their own buckets. Subscriptions, ad share, brand deals, and affiliate income do not count as tips. The more clearly you separate those, the easier it is to defend the tip deduction if asked.

Beluga can help with all of the above, making an otherwise manual process extremely easy and quick.

A Simple Example

Say you earn $40,000 in total tips across streaming in 2025. Your net income from that creator business is $60,000 after expenses. You could deduct up to $25,000 of those tips. If your net income were only $20,000, your tip deduction would be capped at $20,000 since you cannot deduct more than the new from that line of work.

But there is a phaseout. If your modified AGI is $155,000 as a single filer, the deduction will start to phase down. The IRS has not published a detailed phaseout table in the fact sheet, so plan cautiously and check for final guidance at filling time. There is transition relief for 2025, so do not panic if you are waiting on an employer or platform statement.

What To Do Right Now

1. Keep taking tips if your platform and audience supports it. Tips are now more tax efficient than subscriptions or ad share for many creators below the phaseout thresholds. Just do not force it. Tips have to be voluntary.
2. Label tip income clearly in your books. Keep monthly exports and screenshots. Save W-2s and 1099s as they arrive. If you report any tips yourself on Form 4137, keep a copy in the same folder.
3. Check your status against the SSTB (Specified Service Trade or Business) category rule. If a large chunk of your income is for endorsements or licensing your name or likeness, you may be excluded.
4. Watch for the IRS occupation list and any updates. The agency said it would publish the list by October 2, 2025 and offer transition relief for 2025. If you are on the edge, that list will help you decide how aggressive to be with your deductions.

Keep on Creating!

— The Beluga Team