IRS publishes list of jobs that qualify for ‘no tax on tips’ provision

USA Department of Treasury and the Internal Revenue Service released Friday more guidance For taxpayers who can take advantage of the “no tip tax” provision enacted through President Donald Trump’s “big, beautiful bill” signed in July.

Despite the name of the provision, tipped earnings may still be taxed to some extent. Because the deduction applies only to federal income taxes, employees’ tips would still be subject to the payroll taxes that fund Social Security and Medicare. They may also owe state income taxes on earnings.

Additionally, the law, effective for tax years 2025-2028, only allows tipped employees to deduct up to $25,000 as “qualified tips.” This deduction will phase out for individual filers making more than $150,000 a year and married couples making more than $300,000 a year.

An estimated 6 million taxpayers report their wages being tipped IRS.

last edit The IRS on Friday released the names of more than 70 occupations that may receive tips that qualify for the deduction and a clear definition of qualified tips. The agency says skilled occupations fall into one of eight categories:

1. Beverage and food serviceIncludes bartenders, waiters and dishwashers
2. Entertainment and eventsFeaturing musicians, DJs and other artists
3. Hospitality and guest services, Includes concierge and cleaning staff
4. home services, Includes repair workers and field workers
5. personal services, Includes event planners, photographers and personal care aides
6. Personal appearance and health, Includes hair and makeup stylists and personal trainers
7. recreation and education, Includes tour guides, activity instructors and golf assistants
8. Transportation and delivery, Includes taxi and rideshare drivers, carriers, and delivery workers

The IRS says qualified tips are received by workers in the included occupations and must meet several criteria, including:

1. Tips must be paid in cash or a cash equivalent such as credit or debit card payments.
2. Employees must receive tips from customers either directly or through a tip sharing pool.
3. Hints should be optional. For example, automatic service fees for large parties at a restaurant cannot be deducted as a qualifying tip.

Additionally, certified public accountant Jeremy Wells says managers and supervisors who pool tips with employees do not have the right to deduct those amounts, but they can deduct tips they receive directly.

With the 2025 federal tax deadline set for Wednesday, eligible taxpayers are already reaping the benefits of the regulation, IRS CEO Frank J. Bisignano said in the final rule announcement.

“Given the diversity of workers receiving notice, these final regulations help implement a significant tax benefit for American workers,” Bisignano said.

While the policy may give some workers a break, the lowest-income workers may not benefit because they don’t earn enough to owe federal income taxes. Taxpayers who earn less standard deduction – $15,750 for individuals filing jointly or $31,500 for married couples for tax year 2025 – you do not have to file a federal income tax return.

More than a third of tipped workers won’t earn enough to cover their income tax bill in 2022, report finds Yale Budget LabA nonpartisan policy research center.

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