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Frequently Asked Tax Questions

Interest, Dividends, Other Types of Income - Tips

  1. My Form W-2 shows allocated tips in box 8. I tip-out 15% of all my tips to the busser and 5% to the bartender. Do I deduct the tipped-out amounts from the amount in box 8 when I report it on my income tax return?

Rev. date: 12/13/2013

My Form W-2 shows allocated tips in box 8. I tip-out 15% of all my tips to the busser and 5% to the bartender. Do I deduct the tipped-out amounts from the amount in box 8 when I report it on my income tax return?

No.  You cannot deduct tip-outs (the tips you split with other employees) from allocated tips when you report it on your income tax return.
If your employer allocated tips to you, they are shown in box 8 of your Form W-2 (PDF).  They are not included in box 1 with your wages and reported tips.
Allocated tips are amounts your employer assigned to you in addition to the tips you reported.  Your employer is required to allocate tips only if:
Generally, you must report the full amount contained in box 8 of your Form W-2. However, you are not required to report the allocated tip amount if you can prove the amount of tips you actually received with adequate records was less than the allocated amount.  If you do not have records or have inadequate records, you must report the amount in box 8 as income on your tax return.