How to keep track of your tips for taxes
If you earn tips in the US, the IRS expects you to keep a record of them and report them. It's less work than it sounds if you write things down as you go. Here's what to record, why card tips count too, and what the newer "no tax on tips" deduction does and doesn't change.
This is general information for US workers, written to help you keep good records. It isn't tax or legal advice, and tax rules change. For your own situation, check the linked IRS pages or talk to a tax professional.
1. Keep a daily record
The IRS says tipped employees must keep a daily record of the tips they receive. Its Publication 531, Reporting Tip Income explains what that record should cover. In practice, for each shift, write down:
- the date and where you worked;
- cash tips you received;
- tips paid by card, app or other electronic payment;
- tips you received from a tip pool or tip sharing;
- tips you paid out to other employees, and who received them;
- the value of any non-cash tips, like tickets or gifts.
Do it the same night. A record made from memory a week later is hard to trust, for you and for anyone who asks.
2. Card tips are "cash tips" too
This trips people up. In IRS terms, "cash tips" don't only mean paper money. The IRS's tip recordkeeping page says cash tips include tips paid by check, credit card, debit card, gift card, and any electronic or mobile payment app. So when you count your tips, count all of those.
3. Report tips to your employer each month
According to the same IRS page, employees must report cash tips to their employer in writing unless they total less than $20 for the month with that employer. The report is due by the 10th day of the following month. Many restaurants collect this through the point-of-sale system at the end of each shift, so check how yours does it.
4. Tip-outs: keep the names
If you tip out the bar, bussers, runners or kitchen, record how much and to whom. You report the tips you keep, and your record of tip-outs is what shows the difference. It also helps settle any confusion with your employer.
5. What "no tax on tips" means
Starting with the 2025 tax year, a federal income tax deduction for qualified tips is available to some workers. According to the IRS's page What the no tax on tips deduction means for you:
- it's for employees and self-employed people in occupations the IRS lists as customarily receiving tips;
- the maximum deduction is $25,000 a year;
- it phases out for modified adjusted gross income over $150,000, or $300,000 for joint filers;
- qualified tips are voluntary cash or charged tips from customers, including shared tips. Mandatory service charges don't count;
- you can claim it whether you itemize or take the standard deduction;
- you need a valid Social Security number, and married people must file jointly.
What it doesn't do is replace good records. To claim tips, you still need to know what they were. Keeping cash tips, card tips and service charges separate from the start is exactly what makes this deduction easier to work out. For the full rules, see the IRS's guidance on tips and overtime for tax year 2025.
6. At the end of the year
Add up your year by type: cash tips, card tips, tip pool, tip-outs paid, and any service charges paid to you as wages. Compare it with your W-2 and your monthly reports. If something doesn't match, your daily record is what you'll rely on.
Two easy ways to keep the record
On paper: our free printable tip log has a column for each of the things above, with a spreadsheet version too.
On your iPhone: TipHarbor records cash tips, card tips, tip pool and tip-outs with who received them, every shift, and gives you a year-end summary split the same way. It's free, with no ads and no account, and your records stay on your phone.