The U.S. Treasury Department has released an important update that could save thousands of dollars in taxes for workers who receive tips. Here’s what you need to know about this new tax benefit.
What Is the “No Tax on Tips” Rule?
The Treasury Department has published a preliminary list of jobs that qualify for the new “no tax on tips” provision. This tax relief is part of the One Big Beautiful Bill Act (H.R. 1) that was recently signed into law.
Workers in qualifying jobs can now claim a special tax deduction for their tip income. This means you could pay significantly less in federal income taxes on the tips you earn.
How Much Can You Save?
The new rule allows eligible workers to deduct up to $25,000 in qualified tips each year. This deduction is available for tax years 2025 through 2028, giving you four years of potential tax savings.
For example, if you’re in the 22% tax bracket and qualify for the full deduction, you could save up to $5,500 per year in federal taxes.
Who Qualifies for This Tax Break?
To qualify, you must work in a job that “customarily and regularly” received tips on or before December 31, 2024. The Treasury has created specific categories of eligible occupations.
Important Note: Workers in health, performing arts, and athletics fields are not eligible for this deduction, even if they receive tips.
Eligible Job Categories
1. Beverage & Food Service
- Bartenders
- Wait staff
- Food servers, nonrestaurant
- 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
2. Entertainment & 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
3. Hospitality & Guest Services
- Baggage porters and bellhops
- Concierges
- Hotel, motel, and resort desk clerks
- Maids and housekeeping cleaners
4. Home Services
- Home maintenance and repair workers
- Home landscaping and groundskeeping workers
- Home electricians
- Home plumbers
- Home heating and air conditioning mechanics and installers
- Home appliance installers and repairers
- Home cleaning service workers
- Locksmiths
- Roadside assistance workers
5. Personal Services
- Personal care and service workers
- Private event planners
- Private event and portrait photographers
- Private event videographers
Important Things to Remember
The list published by Treasury is preliminary. The official final list will be included in upcoming proposed regulations, though Treasury expects it will be very similar to the current version.
You must have been working in a qualifying occupation that regularly received tips before the end of 2024 to be eligible.
It’s also critical to avoid errors when reporting, Learn how to avoid tax mistakes and IRS penalties.
What Should You Do Next?
If you work in one of the listed occupations, start keeping detailed records of all tips you receive. This includes cash tips, credit card tips, and any other gratuities.
Consider consulting with a tax professional to ensure you’re maximizing this new benefit and complying with all requirements.
Need Help With Your Taxes?
At Virtue CPAs, we stay current with all the latest tax law changes to help our clients save money. If you have questions about the “no tax on tips” provision or need assistance with your tax planning, we’re here to help. If you’re searching for a reliable CPA tax accountant near you, our team can guide you through smart tax strategies that ensure both compliance and savings.
