New Tip Deduction Eligibility List Unveiled

On September 2, 2025, the Treasury Department introduced a draft list of 68 professions now eligible for the innovative "no tax on tips" deduction. Enacted under the "One Big Beautiful Bill Act," signed on July 4, 2025, this deduction impacts federal income taxes for the years 2025 through 2028. 

This deduction allows for a maximum of $25,000 in qualified tips per individual each year. Positioned as a "below-the-line" deduction, it is accessible to those opting for the standard deduction, without affecting the computation of the adjusted gross income (AGI).

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Highlighted below are the Treasury’s draft-listed professions:

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

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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 OBBB tip exclusion outlines a set of temporary tax deductions made available to qualified tipped workers from 2025 to 2028. These deductions are filed individually and hinge on income limitations. 

Eligibility Requirements: Workers must meet these conditions to qualify: 

  • Be a qualified tipped worker: The individual must be either an employee or an independent contractor in roles historically receiving tips prior to 2025, as shown in the drafted eligible occupations.

  • Have qualified tips: Tips should be voluntarily given by customers, whether in cash, via credit card, or through a tip-sharing mechanism. Compulsory service charges do not qualify.

  • Properly report tips: Ensure that tips are reported to the IRS using either Form W-2 (for employees) or Form 1099 (for independent contractors).

  • File jointly if married: Couples must file a joint tax return to leverage the deduction.

  • Provide a Social Security Number (SSN): Deduction claims necessitate an SSN on the tax return. 

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Deduction Limitations: The deduction is limited and phases out for high-income earners: 

  • Maximum deduction: The annual cap is $25,000.

  • Income phase-out: Gradual deduction reduction commences when taxpayers' modified adjusted gross income (MAGI) surpasses certain thresholds:

    • Single filers: Reduction begins over a MAGI of $150,000.

    • Married filing jointly: Reduction begins over a MAGI of $300,000. 

Further Considerations:

  • Does not apply to payroll taxes: Though the deduction reduces a worker’s income for federal tax liabilities, tips remain subject to Social Security and Medicare taxes, or self-employment tax in the case of independent contractors.

  • Temporary provision: The tip deduction is slated to end on December 31, 2028.

  • Not tax-free: This is a deduction, not an exemption. Thus, all tip income must be declared, albeit reduced by the deduction.

  • State tax implications: Effects on state income taxes will vary, contingent upon the tax laws of the state in question. 

In summary, knowing which roles qualify for tip deductions is pivotal for both employees and employers aiming to increase their tax advantages. By staying updated on the nuances that define eligible tips and recognizing how different roles align with these standards, individuals can maintain compliance and fine-tune their taxation strategies. As evolving tax legislation continues to unfold, keeping abreast of these changes and seeking expert guidance remains crucial for navigating the intricacies of tip-related deductions effectively.

Reach out to MJ Ahmed CPA PLLC in the Dallas-Fort Worth area for proficient guidance and assistance.

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