PaidFair“No Tax on Tips,” in plain English
Last reviewed July 2026 · A plain-language summary, not tax advice.
The One Big Beautiful Bill Act (signed July 2025) created a new federal deduction most people call “No Tax on Tips.” It genuinely helps a lot of tipped workers — but it’s widely misunderstood, and it runs entirely on good records. Here’s the short version, and where PaidFair fits.
First, the honest part: PaidFair is a record of tips and hours — not tax software, and nothing here is tax advice. Rules change and every situation is different. For the official rules, see the IRS links below or talk to a tax professional.
What it actually is
- A deduction of up to $25,000 a year on qualified tips, for tax years 2025 through 2028.
- It lowers taxable income — it does not make tips tax-free.
- It phases out for higher earners (roughly $150,000 in income, about $300,000 for joint filers).
- It covers voluntary tips in jobs that customarily receive tips — servers, bartenders, salon staff, and more.
What still gets taxed (the part people miss)
- You still owe Social Security and Medicare on tips.
- You may still owe state income tax — many states don’t follow the federal rule.
- Tips still have to be reported. Don’t report them and you lose the deduction — and risk penalties.
What changed for owners in 2026
The biggest operational change is on the employer side:
- Starting with 2026 W-2s, employers must separately report qualified tips — cash tips in Box 12 (code “TP”) and a Treasury Tipped Occupation Code in the new Box 14b.
- From 2026, only tips that were reported separately count toward the deduction.
- Translation: your team’s ability to claim the deduction now depends on accurate, per-person, separated tip records all year — not a scramble in January.
It comes down to records — which is where PaidFair helps
The deduction is the law’s doing, not any app’s. But it only works if the tips are tracked and reported cleanly, and that’s exactly what PaidFair is built for.
PaidFair keeps a clean, per-person record of cash and card tips every pay period — split fairly by who actually worked, with the math shown — and exports it as CSV or PDF for your payroll or bookkeeper, ready for the new W-2 tip reporting. It’s the record; your payroll and accountant handle the filing.
- Per-person cash vs card tip totals, every pay period.
- Fair splits with the arithmetic shown, so the numbers hold up.
- One-tap export to hand your bookkeeper or payroll — QuickBooks, Gusto, ADP.
Quick answers
Does “No Tax on Tips” mean my tips are tax-free?
No. It’s a deduction of up to $25,000 that lowers your federal taxable income (2025–2028). You still owe Social Security and Medicare, and possibly state income tax.
Do I still have to report my tips?
Yes — and it matters more now. Unreported tips can’t be deducted, and from 2026 only separately-reported tips count.
Does PaidFair do my taxes or file anything?
No. PaidFair keeps the tip and hour records and exports them. Filing is up to you, your payroll provider, or your accountant.
How does PaidFair make this easier?
It tracks per-person cash and card tips all year and exports clean totals — the records you need to report tips accurately and support the deduction.
Not tax advice. This page is a plain-language summary, last reviewed July 2026. For the official rules and how they apply to you, see the IRS: What the “No Tax on Tips” deduction means for you and how to take advantage of no tax on tips — or talk to a tax professional.
Questions about PaidFair? Email support@strivenindustries.com — Striven Industries LLC.