Glass tip jar labeled “Tips,” representing tipped workers and tip income tax rules in Neosho, Missouri.

No Tax on Tips in 2025?

January 30, 2026•2 min read

No Income Tax on Tips in 2025? What Tipped Workers in Neosho and Joplin Need to Know

If you earn tips — as a server, bartender, delivery driver, or rideshare driver — there’s a new tax rule for 2025 that could save you money.

Under the new tax law, tip income may be exempt from federal income tax up to $25,000. That’s good news for many tipped workers in Neosho, Joplin, Seneca, Webb City, and surrounding areas— but only if it’s handled correctly.

Let’s walk through what this means and what you’ll need when tax time comes.

How the Tip Income Tax Exemption Works

Starting in 2025, qualifying taxpayers do not have to pay federal income tax on tips earned, up to $25,000.

There are income limits to be aware of:

The exemption begins to phase out if your adjusted gross income is over $150,000 for single filers
It phases out after $300,000 for married filing jointly

This applies specifically to tip income, not your regular hourly wages.

What Taxes Still Apply to Tip Income?

Even if your tips qualify for the income tax exemption, you are still responsible for paying:

Social Security tax
Medicare tax

These payroll taxes are usually withheld from your paycheck and will continue to appear on your W-2.

Why Your W-2 and Pay Records Matter

To claim this exemption correctly, your income must be properly documented.

Ideally, your W-2 should clearly separate regular wages from tip income. If it doesn’t, you’ll need additional paperwork, such as:

Your final paycheck stub of the year, or
A payroll report or letter from your employer showing the breakdown between regular pay and tips

Without this information, your tax preparer may not be able to apply the exemption correctly.

Why Getting This Right Is Important

This tax break could put real money back in your pocket — but only if it’s reported accurately. Missing documentation or incorrect reporting can lead to:

Filing delays
Errors on your tax return
Follow-up requests later

A little preparation now can make tax season much smoother.

Need Help with Your Taxes?

If you earn tips and work in or around Neosho, Joplin, Seneca, or Webb City, and you’re not sure how this applies to you, I’d be happy to help.

Lemman Tax Accountant PLLC
Serving Neosho, MO and surrounding communities
Phone: 480-580-9876

Nedda Lemman

Nedda Lemman is the owner of Lemman Tax Accountant, located just off the square in Neosho, Missouri. With more than two decades of experience in tax preparation, bookkeeping, and small business accounting, Nedda provides clients with the confidence and clarity they need to manage their finances well. Before moving to Missouri, Nedda owned and operated a thriving accounting practice in Arizona for 21 years. As an Enrolled Agent licensed by the IRS, she is authorized to represent clients in all 50 states, offering the highest level of expertise and professionalism to individuals and small business owners alike. Nedda’s approach to accounting is deeply personal and rooted in her faith and integrity. She believes that every client is more than a number—they’re a partner in success. By taking time to understand each client’s goals and challenges, Nedda creates practical strategies that bring peace of mind and long-term financial stability. When she’s not helping clients, Nedda enjoys spending time with her husband of over 40 years, their four children, and five grandchildren. Guided by her strong faith, she strives to serve others with honesty, compassion, and dedication—both in life and in business.

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