No Tax on Tips: a restaurant server claims the new 2025 tip deduction
A single restaurant server in Miami whose W-2 includes reported tips. The One Big Beautiful Bill Act's new No Tax on Tips deduction (Schedule 1-A) lets her deduct her qualified tips on top of the standard deduction, for tax years 2025 through 2028.
Taxpayer facts
Who this is and what their year looked like.
Marisol is single, 27, and serves tables full time at a waterfront restaurant in Miami. She rents an apartment in Little Havana.
Her only income is her W-2 from the restaurant, which reports both her hourly base pay and the tips she reported to her employer over the year. 2025 is the first year the No Tax on Tips deduction is available.
- NameMarisol C. Navarro
- Date of birth04/12/1998
- SSN265-41-9073
- Age (as of 12/31/2025)27
- Filing statusSingle
- DependentsNone
- Claimed as a dependent by anyone else?No
- OccupationRestaurant server
- Address1820 SW 8th St, Apt 5, Miami, FL 33135
- ResidencyFlorida, full year (no state income tax)
- TipsAll tips were reported to the employer and appear on the W-2. Server is an occupation on the IRS customarily-tipped list; the restaurant is not a Specified Service Trade or Business.
- Health coverageEmployer plan, full year
Source documents
Work from these the way you would a real client's paperwork. Everything is fictional.
Objectives
What a correct return should capture.
- Report the W-2 box 1 wages on Form 1040 line 1a. The reported tips are already inside box 1, so they are part of wages and part of AGI.
- Identify the qualified tips from the W-2 (the reported tip amount) for the new No Tax on Tips deduction.
- Confirm the taxpayer qualifies: a customarily-tipped occupation on the IRS list, an employer that is not a Specified Service Trade or Business, and modified AGI under the single phase-out threshold.
- Claim the No Tax on Tips deduction on new Schedule 1-A, limited to the lesser of the qualified tips or the annual cap.
- Take the single standard deduction, which applies in addition to the tips deduction, to reach taxable income.
- Figure the tax from the Tax Table, then compare it to the federal withholding in box 2 for the refund. Note that Florida has no state income tax.
Check your work
The answer key and the complete return, the way a real client receives it: the 1040 and its schedules, the workpapers behind every number, and the signature forms.
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