Rideshare and app-based delivery driving is gig work, but the tip deduction still reaches it: drivers are self-employed workers in a customarily tipped occupation, and in-app tips flow through the platform onto your 1099-K or 1099-NEC — which means they're reported, and reported tips are deductible up to $25,000. The deduction runs 2025 through 2028 and works alongside your mileage and expense deductions.
Because you're self-employed, the deduction is capped at the net income of your driving business — your fares and tips minus mileage and expenses. That's an important interaction: aggressive mileage deductions that push your net toward zero also cap how much tip deduction you can use. A professional sizes both together so you don't leave either on the table.
The deduction lowers federal income tax, not self-employment tax, and phases out above $150,000 of income ($300,000 joint). Most drivers' 2025 returns missed it entirely, because gig tax software imported the 1099 totals as undifferentiated income and never separated the tip line. Form 1040-X recovers it.