Louisiana workers who rely on tips will see meaningful tax relief starting this year, thanks to a newly enacted federal law that exempts a portion of their tip income from taxation. The “No Tax on Tips” provision, part of the broader One Big Beautiful Bill Act signed into law on July 4, officially became federal law as Public Law 119-21—and Louisiana is among the states embracing it without additional legislative hurdles.

The new law allows employees and self-employed individuals in tip-based occupations to deduct up to $25,000 annually in qualified tips from their taxable income. The deduction applies to voluntary tips received in cash, by card, or through tip-sharing arrangements, and must be reported through standard IRS channels such as Form W-2, Form 1099, or Form 4137 for unreported tips.

Waitstaff, bartenders, hair stylists, delivery drivers, casino workers, and others in traditionally tipped professions stand to benefit the most. To qualify, the occupation must have been recognized by the IRS as regularly receiving tips by the end of 2024.

Self-employed individuals can also take the deduction, though it is capped at their net income from the relevant trade or business, before accounting for the tip deduction.

The full deduction is available to individuals earning less than $150,000 in modified adjusted gross income (MAGI), or $300,000 for married couples filing jointly. Above these thresholds, the deduction phases out.

Because Louisiana’s income tax system largely conforms to federal adjusted gross income, most workers in the state will automatically see the benefit of this deduction reflected on their state returns as well—without needing to complete separate calculations or forms. That’s welcome news in a state where service industries play a major role in the economy, particularly in hospitality hubs like New Orleans, Baton Rouge, and Natchitoches.

The deduction takes effect for tax year 2025 and will remain in place through 2028, barring further congressional action. The IRS is expected to release updated instructions and guidance before the end of the year.

In the meantime, tip earners are encouraged to continue accurate recordkeeping and reporting. The deduction doesn’t eliminate reporting requirements—only the tax burden on qualifying amounts.

For service workers across Louisiana, especially those juggling fluctuating incomes and long shifts, the “No Tax on Tips” provision offers more than just savings—it’s a nod to the essential roles they play in the state’s economy.