Tipped occupations ยท Transportation and Delivery
Rideshare and Delivery Driver Tips: The 2026 Tips Deduction Without a W-2
Taxi and rideshare drivers and chauffeurs appear on the Treasury list behind the 2026 tips deduction as occupation code 802, and goods delivery people as code 804, both in the Transportation and Delivery category of the final regulations (T.D. 10044). Most app-based drivers are independent contractors, so there is no W-2 and no Box 12 code TP: the tips are self-employment income, and the IRS states that a self-employed worker may deduct qualified tips up to the net income from the business in which the tips were received, on Schedule 1-A, within the same $25,000 per return limit. A mandated delivery charge is not a tip under the IRS's own examples, and amounts the platform itself pays are not customer tips either.
Last reviewed: November 4, 2026.
The facts, in one table
| Treasury Tipped Occupation Codes | 802, Taxi and Rideshare Drivers and Chauffeurs; 804, Goods Delivery People |
|---|---|
| Category in the final regulations | Transportation and Delivery |
| Related codes in the same category | 801, Parking and Valet Attendants; 803, Shuttle Drivers; 809, Home Movers |
| The deduction | Up to $25,000 of qualified tips per return, for tax years 2025 through 2028, claimed on Schedule 1-A whether or not you itemize. For a self-employed worker the IRS adds a second limit: the deduction cannot exceed the net income from the trades or businesses in which the tips were received (IRS Tax Tip 2026-26) |
| Phaseout | The amount after the $25,000 limit is reduced by $100 for each $1,000 of modified adjusted gross income over $150,000, or $300,000 on a joint return, counting whole $1,000 steps only (section 224(b)(2) of the Internal Revenue Code; 26 CFR 1.224-1(b)(2)) |
| Reporting condition | The IRS states that qualified tips must be reported on Form W-2, Form 1099-MISC, Form 1099-NEC or Form 1099-K, or reported directly by the taxpayer on Form 4137, to be eligible for the deduction (Tax Tip 2026-26). In-app tips sit inside the platform's reported totals rather than on a line of their own, so the driver's own trip records are what identify them |
| Self-employment tax | Unchanged by the deduction. Tips are part of self-employment income, and the deduction reduces income tax only, not self-employment tax |
Read the code the way the site reads the whole list: appearing on the Treasury list is a published fact about an occupation. It is not a decision about any one worker, and the rest of the rules on this page, the reporting rule in particular, decide what a deduction is built from. The full list of 71 codes is on the Treasury Tipped Occupation Codes page.
platform pay is not a tip
No W-2: how a driver's income and tips are taxed
An app-based driver is usually an independent contractor, not an employee. Nothing is withheld, no W-2 is issued, and the year's driving income, tips included, is reported as self-employment income on Schedule C. The IRS position, stated for gig workers generally, is that the income must be reported on a tax return whether or not an information return arrives for it: platforms report under Form 1099-K and Form 1099-NEC at their own thresholds, and the duty to report does not wait for either form. Two PlainStub tools are built for exactly this side of the system: the 1099 tax calculator estimates self-employment tax and income tax together, and the quarterly estimated tax calculator splits the year across the four IRS payment dates.
For the tips deduction, the contractor's version of the reported-figure rule runs through the 1099 forms and your own records. The IRS states that qualified tips must be reported on one of those forms, or directly by the taxpayer on Form 4137, to be eligible (Tax Tip 2026-26). In-app tips are inside the totals a platform reports, not separated out, so keep the per-trip records the app gives you: they are the evidence of how much of the total was tips, and the deduction cannot exceed the net income of the driving business in any case.
What counts as a qualified tip for a driver
A qualified tip is a voluntary payment, in an amount the customer decides, received in an occupation on the Treasury list. Sorted by the IRS definitions, the cases a driver actually meets are these:
- The tip a rider or customer adds in the app, in an amount they choose: the core case, a voluntary payment from the customer, including where the customer picks one of the app's suggested amounts of their own free choice.
- A cash tip handed over at the curb or the door: the same kind of payment, and income in the same way. No platform statement will show it separately, so your own record is the only one that exists.
- A mandated delivery charge: not a tip. The IRS names the mandated delivery charge, for pizza or other retail deliveries, as one of its own service charge examples in Topic No. 761. A charge that must be paid is not a customer's voluntary payment, whichever side of the app sets it.
- Amounts the platform itself pays, such as promotions, quests, boosts, and fees it sets: pay from the platform, not a payment from a customer, so not tips. They are income, and they are taxed, but they cannot be part of a tips deduction.
- A tip added after the trip or the delivery is complete: a tip on the same footing as one added before. What decides the question is that the customer chose to pay it and chose the amount.
the wage table below covers employees
The wage under the tips
The tipped minimum wage table below binds employers, and most app-based drivers are not employees, so for a contractor it is background rather than a pay rule: nobody owes a contractor an hourly wage at all. It is printed in full, as the Department of Labor publishes it, because employed drivers, including many taxi and shuttle drivers, are covered by it, and because the figures are looked up by drivers on both sides of that line. If you drive as an employee, your state's row is the floor under your cash wage.
| Minimum wage the combined pay must reach | $7.25 an hour |
|---|---|
| Lowest cash wage an employer may pay a tipped employee | $2.13 an hour |
| Maximum tip credit | $5.12 an hour |
| Tipped employee, federal definition | A worker in an occupation that customarily and regularly receives more than $30 a month in tips |
The tip credit is a credit toward the minimum wage, not a discount on it: the employer may count up to $5.12 an hour of a tipped employee's tips toward the $7.25, and if cash wages plus tips do not reach the full minimum wage, the employer owes the difference. States set their own floors on top of the federal one, and the full state table, exactly as the U.S. Department of Labor publishes it, follows. Source: U.S. Department of Labor, Wage and Hour Division, "Minimum Wages for Tipped Employees", last revised July 1, 2026, retrieved November 4, 2026.
States that require the full state minimum wage before tips
| Jurisdiction | Basic combined cash and tip minimum wage | Maximum tip credit | Minimum cash wage | Tipped employee: tips received per month |
|---|---|---|---|---|
| Alaska | $14.00 | |||
| California | $16.90 | |||
| Guam | $9.25 | |||
| Minnesota | $11.41 | |||
| Montana: business with gross annual sales over $110,000 | $10.85 | |||
| Montana: business not covered by the Fair Labor Standards Act, with gross annual sales of $110,000 or less | $4.00 | |||
| Nevada | $12.00 | |||
| Oregon | $15.55 (standard statewide); $16.80 (Portland metro); $14.55 (nonurban counties) | |||
| Washington | $17.13 |
States that require a minimum cash wage above the federal $2.13 an hour
| Jurisdiction | Basic combined cash and tip minimum wage | Maximum tip credit | Minimum cash wage | Tipped employee: tips received per month |
|---|---|---|---|---|
| Arizona | $15.15 | $3.00 | $12.15 | Not specified |
| Arkansas | $11.00 | $8.37 | $2.63 | Not specified |
| Colorado | $15.16 | $3.02 | $12.14 | More than $30 |
| Connecticut: hotel and restaurant workers | $16.94 | $10.56 | $6.38 | Not specified |
| Connecticut: bartenders who customarily receive tips | $16.94 | $8.71 | $8.23 | |
| Delaware | $15.00 | $12.77 | $2.23 | More than $30 |
| District of Columbia | $18.40 | $8.10 | $10.30 | Not specified |
| Florida | $14.00 | $3.02 | $10.98 | More than $30 |
| Hawaii | $16.00 | $1.25 | $14.75 | |
| Idaho | $7.25 | $3.90 | $3.35 | More than $30 |
| Illinois | $15.00 | 40 percent of the applicable minimum wage ($6.00) | $9.00 | Not specified |
| Iowa | $7.25 | 40 percent of the applicable minimum wage ($2.90) | $4.35 | More than $30 |
| Maine | $15.10 | 50 percent of the applicable minimum wage ($7.55) | $7.55 | More than $191 |
| Maryland | $15.00 | $11.37 | $3.63 | More than $30 |
| Massachusetts | $15.00 | $8.25 | $6.75 | More than $20 |
| Michigan | $13.73 | $8.24 | $5.49 | Not specified |
| Missouri | $15.00 | 50 percent of the applicable minimum wage ($7.50) | $7.50 | Not specified |
| New Hampshire | $7.25 | $3.98 | $3.27 | More than $30 |
| New Jersey | $15.92 | $9.87 | $6.05 | More than $30 |
| New Mexico | $12.00 | $9.00 | $3.00 | More than $30 |
| New York | $17.00 (New York City, Long Island and Westchester); $16.00 (remainder of the state) | Varies by region and type of employer | Varies by region and type of employer | Not specified |
| North Dakota | $7.25 | 33 percent of the applicable minimum wage ($2.39) | $4.86 | More than $30 |
| Ohio: employers with annual gross receipts of $405,000 or more | $11.00 | $5.50 | $5.50 | More than $30 |
| Oklahoma | $7.25 | $5.12 | $2.13 | Not specified |
| Pennsylvania | $7.25 | $4.42 | $2.83 | $135 |
| Rhode Island | $16.00 | $12.11 | $3.89 | More than $30 |
| South Dakota | $11.85 | 50 percent of the applicable minimum wage ($5.92) | $5.93 | More than $35 |
| Vermont | $14.42 | 50 percent of the applicable minimum wage ($7.21) | $7.21 | More than $120 |
| Virgin Islands | $10.50 | $6.30 | 40 percent of the applicable minimum wage ($4.20) | Not specified |
| Wisconsin | $7.25 | $4.92 | $2.33 | Not specified |
| West Virginia | $8.75 | 70 percent of the applicable minimum wage ($6.13) | $2.62 | Not specified |
States where the minimum cash wage is the federal $2.13 an hour
| Jurisdiction | Basic combined cash and tip minimum wage | Maximum tip credit | Minimum cash wage | Tipped employee: tips received per month |
|---|---|---|---|---|
| Alabama | $7.25 | $5.12 | $2.13 | More than $30 |
| American Samoa | Special minimum wage rates apply | $2.13 | More than $30 | |
| Georgia | $7.25 | $5.12 | $2.13 | More than $30 |
| Indiana | $7.25 | $5.12 | $2.13 | More than $30 |
| Kansas | $7.25 | $5.12 | $2.13 | Not specified |
| Kentucky | $7.25 | $5.12 | $2.13 | More than $30 |
| Louisiana | $7.25 | $5.12 | $2.13 | More than $30 |
| Mississippi | $7.25 | $5.12 | $2.13 | More than $30 |
| Nebraska | $15.00 | $12.87 | $2.13 | Not specified |
| North Carolina | $7.25 | $5.12 | $2.13 | More than $20 |
| Northern Mariana Islands | $7.25 | $5.12 | $2.13 | More than $30 |
| Puerto Rico | $10.50 | $8.37 | $2.13 | More than $30 |
| South Carolina | $7.25 | $5.12 | $2.13 | More than $30 |
| Tennessee | $7.25 | $5.12 | $2.13 | More than $30 |
| Texas | $7.25 | $5.12 | $2.13 | More than $20 |
| Utah | $7.25 | $5.12 | $2.13 | More than $30 |
| Virginia | $12.77 | $10.64 | $2.13 | More than $30 |
| Wyoming | $7.25 | $5.12 | $2.13 | More than $30 |
- Florida: the figures above are the ones in the July 1, 2026 revision. The Department of Labor's own footnote to this table states that the Florida minimum wage is scheduled to increase by $1.00 every year on September 30 until reaching $15.00 on September 30, 2026.
- Hawaii: the tip credit is permissible only if the combined amount the employee receives from the employer and in tips is at least $7.00 more than the applicable minimum wage.
- Michigan: the Department of Labor's footnote states that the Michigan tipped cash wage is scheduled to increase annually until it reaches 50 percent of the state minimum wage in 2031, and that the Michigan minimum wage is scheduled to increase to $15.00 on January 1, 2027.
- District of Columbia: employers must currently pay a minimum cash wage of at least 56 percent of the standard minimum wage.
- No state minimum wage law: Alabama, Louisiana, Mississippi, South Carolina and Tennessee have no state minimum wage law, and Georgia's law does not apply to tipped employees; employers covered by the Fair Labor Standards Act in those states pay at least the federal minimum wage.
- Not in this table: the Department of Labor notes that some states set subminimum rates for minors or students or a training wage, and some cities and counties set minimum wages higher than the state rate. The Department advises checking with the state labor office for official information.
Estimate the deduction on your own figures
The tips deduction calculator takes your reported tip total and your income, applies the $25,000 limit and the phaseout, and returns an estimated deduction. It asks for nothing but the figures, and the calculation runs in your browser.
The tips calculator is built around the W-2 code TP figure, which a contractor does not have. Run it with your own recorded tip total as the starting figure, and hold the second limit in view while you do: as a self-employed worker, your deduction cannot exceed the net income from the driving business itself (Tax Tip 2026-26). If some of your driving is done as an employee, that part has a W-2 and a code TP, and the two parts meet on the same Schedule 1-A.
The other large figure in a driver's year is the car itself. The gig driver mileage deduction page estimates the Schedule C deduction for business miles, at the split 2026 standard mileage rates of 72.5 cents for the first half of the year and 76 cents for the second, and sets out the log the deduction stands on.
Other tipped occupations on this site
- Bartender tips deduction, code 101
- Server tips deduction, codes 102 and 103
- Barber and stylist tips deduction, code 603
- Casino dealer tips deduction, code 201
- Golf caddie tips deduction, code 701
- Home services tips deduction, codes 401 to 409
- Hotel staff tips deduction, codes 301 to 304
- Valet parking tips deduction, code 801
- All 71 Treasury Tipped Occupation Codes
Questions and answers
I drive rideshare for one app and deliver food on another. One deduction or two?
One deduction per return, up to $25,000 of qualified tips in total. The occupation codes differ, 802 for rideshare driving and 804 for goods delivery, but the deduction is a single Schedule 1-A item. The self-employed limit the IRS states is measured against the net income from the trades or businesses in which the tips were received (Tax Tip 2026-26).
My app shows tips inside my total earnings, not separately. Is that enough?
The IRS condition is that qualified tips be reported on a Form 1099-K, Form 1099-NEC or Form 1099-MISC, or reported directly by the taxpayer on Form 4137 (Tax Tip 2026-26). Platform totals include your tips without separating them, so keep your own per-trip records identifying the tip part of each total. Those records are what support the figure you use, and the deduction is in any case capped by the net income of the business.
Do I owe self-employment tax on my tips?
Yes. Tips are part of self-employment income, and the tips deduction reduces income tax, not self-employment tax. The 1099 tax calculator on this site estimates self-employment tax and income tax on the same figures, which is the combination a driver's return actually turns on.
Sources
- Treasury Decision 10044, April 13, 2026. The final regulations carrying the 71 Treasury Tipped Occupation Codes. Federal Register, Vol. 91, No. 70, pages 19026 to 19056; the list is Table 1 to paragraph (h) of 26 CFR 1.224-2.
- IRS, Tax Tip 2026-26, March 31, 2026, "Filing tips and updates for gig economy workers". Gig workers may deduct up to $25,000 in tips per return for 2025 through 2028; self-employed workers may deduct qualified tips up to the net income from the trades or businesses in which they were received; qualified tips must be reported on Form W-2, Form 1099-MISC, Form 1099-NEC or Form 1099-K, or reported directly by the taxpayer on Form 4137, to be eligible for the deduction; all gig income must be reported whether or not an information return arrives.
- IRS, Topic No. 761, Tips: withholding and reporting. Cash tips include tips received directly from customers, tips from other employees under any tip-sharing arrangement, and charged tips; the $20 a month reporting rule; service charges are non-tip wages, with the IRS's own examples. Read in full November 4, 2026.
- U.S. Department of Labor, Wage and Hour Division, "Minimum Wages for Tipped Employees". The state tipped minimum wage table on this page is transcribed from this source in full: document last revised July 1, 2026, retrieved November 4, 2026.
- Public Law 119-21, enacted July 4, 2025. Created this deduction in section 224 of the Internal Revenue Code, including its $25,000 limit and the phaseout in section 224(b)(2).
Last reviewed: November 4, 2026.