Treasury and IRS Release Guidance on “No Tax on Tips” Provision
WASHINGTON, D.C. — The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have issued proposed regulations under the “One, Big, Beautiful Bill” that clarify the implementation of the “no tax on tips” provision. These regulations identify occupations that customarily and regularly receive tips and define what constitutes “qualified tips” eligible for tax deductions.
The proposed regulations include nearly 70 distinct tipped occupations, ranging from bartenders to water taxi operators. Public comments are invited and must be submitted via Regulations.gov within 30 days, with a deadline of October 23, 2025. Full instructions for submitting feedback are included in the proposed regulations.
Categories of Tipped Occupations
The Treasury Tipped Occupation Code assigns a three-digit identifier and description to each occupation, grouped into eight categories:
- 100s – Beverage and Food Service
- 200s – Entertainment and Events
- 300s – Hospitality and Guest Services
- 400s – Home Services
- 500s – Personal Services
- 600s – Personal Appearance and Wellness
- 700s – Recreation and Instruction
- 800s – Transportation and Delivery
What Are Qualified Tips?
To claim the deduction, workers must be employed in one of the listed occupations and receive qualified tips, which are defined by the following criteria:
- Form of Payment: Tips must be paid in cash or equivalent forms such as checks, credit/debit cards, gift cards, or mobile payment apps (excluding most digital assets).
- Source of Tips: Tips must come directly from customers or through a recognized tip-sharing arrangement (e.g., tip pools).
- Voluntary Nature: Tips must be voluntarily given by the customer and not subject to negotiation. Mandatory service charges (e.g., an automatic 18% gratuity for large parties) do not qualify.
- Exclusions: Any amount received in connection with illegal activities, including prostitution or pornographic services, is not considered a qualified tip.
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Source Credit: IRS.GOV
