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:

o Single filers: The deduction begins to phase out for MAGI over $150,000.

o 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 our office with questions and assistance.