On September 2, 2025, the Treasury Department released a draft list of 68 occupations eligible for the new "no tax on tips" deduction. This deduction is part of the "One Big Beautiful Bill Act," signed into law on July 4, 2025, and applies to federal income taxes for the 2025–2028 tax years.
The deduction is available for a maximum of $25,000 in qualifying tips per person, per year. It is structured as a “below-the-line” deduction, meaning it is available to taxpayers who take the standard deduction, but is not used to compute adjusted gross income (AGI).
Here is the Treasury’s draft list of occupations:
Beverage & Food Service:
Bartenders
Wait staff
Food servers, non-restaurant
Dining room and cafeteria attendants and bartender helpers
Chefs and cooks
Food preparation workers
Fast Food and Counter Workers
Dishwashers
Host staff, restaurant, lounge, and coffee shop
Bakers
Entertainment and Events:
Gambling dealers
Gambling change persons and booth cashiers
Gambling cage workers
Gambling and sports book writers and runners
Dancers
Musicians and singers
Disc jockeys (except radio)
Entertainers and performers
Digital content creators
Ushers, lobby attendants and ticket takers
Locker room, coatroom and dressing room attendants
Hospitality and Guest Services:
Baggage porters and bellhops
Concierges
Hotel, motel and resort desk clerks
Maids and housekeeping cleaners
Home Services
Home maintenance and repair workers
Home landscaping and groundskeeping workers
Home electricians
Home plumbers
Home heating/air conditioning mechanics and installers
Home appliance installers and repairers
Home cleaning service workers
Locksmiths
Roadside assistance workers
Personal Services
Personal care and service workers
Private event planners
Private event and portrait photographers
Private event videographers
Event officiants
Pet caretakers
Tutors
Nannies and babysitters
Personal Appearance and Wellness
Skincare specialists
Massage therapists
Barbers, hairdressers, hairstylists and cosmetologists
Shampooers
Manicurists and pedicurists
Eyebrow threading and waxing technicians
Makeup artists
Exercise trainers and group fitness instructors
Tattoo artists and piercers
Tailors
Shoe and leather workers and repairers
Recreation and Instruction
Golf caddies
Self-enrichment teachers
Recreational and tour pilots
Tour guides and escorts
Travel guides
Sports and recreation instructors
Transportation and Delivery:
Parking and valet attendants
Taxi and rideshare drivers and chauffeurs
Shuttle drivers
Goods delivery people
Personal vehicle and equipment cleaners
Private and charter bus drivers
Water taxi operators and charter boat workers
Rickshaw, pedicab, and carriage drivers
Home movers
The requirements for the OBBB tip exclusion are a set of temporary tax deductions for qualified tipped workers, available for tax years 2025 through 2028. The deduction is taken on an individual's tax return and is subject to income limitations.
Eligibility Requirements: To be eligible for the deduction, a worker must meet the following criteria:
Be a qualified tipped worker: Must be an employee or independent contractor in an occupation that customarily and regularly received tips before 2025. See the draft list of qualifying occupations.
Have qualified tips: The tips must be voluntarily paid by a customer. This includes tips received in cash, charged on a credit card, or from a tip-sharing arrangement. Mandatory service charges are not eligible.
Properly report tips: The tips must be reported to the IRS on either a Form W-2 (for employees) or Form 1099 (for independent contractors).
File jointly if married: If married, the couple must file a joint tax return to claim the deduction.
Provide a Social Security Number (SSN): Anyone claiming the deduction must include their SSN on their tax return.
Deduction Limitations: The maximum deduction is limited and phases out for high-income earners:
Maximum deduction: The maximum annual deduction is $25,000.
Income phase-out: The deduction is gradually reduced for taxpayers with a modified adjusted gross income (MAGI) over a certain amount:
Single filers: The deduction begins to phase out for MAGI over $150,000.
Married filing jointly: The deduction begins to phase out for MAGI over $300,000.
Other Considerations:
Does not apply to payroll taxes: While tips are deductible from the worker’s income when figuring their federal income tax, they are still subject to Social Security and Medicare taxes or self-employment tax in the case of independent contractors.
Temporary provision: The tip deduction is a temporary measure, scheduled to expire after December 31, 2028.
Not tax-free: This is a deduction, not an exemption. So, the worker will still have to report all tip income, which will then be reduced by the deduction amount.
State tax implications: The effect on state income taxes will depend on the worker’s state's tax laws.
In conclusion, understanding which occupations qualify for tip deductions is essential for both employees and employers seeking to maximize their tax benefits. By staying informed about the specific criteria that define qualified tips and knowing how different occupations fit into this framework, individuals can ensure compliance while optimizing their tax strategies. As tax laws continue to evolve, it remains crucial for stakeholders to stay updated on legislative changes and seek professional advice as needed to navigate the complexities of tip income and deductions effectively.
Contact this office with questions and assistance.
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