The IRS Just Published the Tips List—Are You On It?

Dear Client:

Congress enacted the One Big Beautiful Bill Act, or OBBBA, in July. This law created a new deduction called the No Tax on Tips deduction. From 2025 through 2028, workers who regularly receive tips can exclude up to $25,000 of tips from their taxable income.

However, all tip income remains subject to Social Security and Medicare taxes. Both employees and independent contractors (self-employed workers) can use this deduction.

You qualify for the deduction only if you work in an occupation that customarily received tips before 2025. The IRS determines which occupations meet this standard. It has recently published a preliminary list of qualifying occupations, and you can claim the deduction only if your job appears on this list.

The IRS list includes 68 occupations across eight industries. It covers obvious tipped jobs such as waitstaff, taxi and rideshare drivers, casino dealers, barbers, and hairstylists. But it also covers many surprising occupations, including plumbers, electricians, social media influencers, and podcasters.

To qualify, the tip must be voluntary and cannot result from negotiation between the customer and the worker.

If you would like to discuss the tips deduction, please reach out to us at Admin@strategicfinancialreporting.com