The Department of the Treasury and the IRS have released proposed regulations on the “no tax on tips” provision included in the One, Big, Beautiful Bill. These regulations outline which occupations are considered tipped jobs and define what counts as “qualified tips” that taxpayers can claim as a deduction.
The proposed list covers nearly 70 occupations, ranging from bartenders to water taxi operators. Treasury and IRS are asking for public comments within 30 days, with submissions due by October 23, 2025 through Regulations.gov
Tipped Occupations
The proposed rules establish a Treasury Tipped Occupation Code system, assigning a three-digit code and description to each recognized occupation. The occupations fall into eight major groups:
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100s – Beverage and Food Service
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200s – Entertainment and Events
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300s – Hospitality and Guest Services
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400s – Home Services
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500s – Personal Services
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600s – Personal Appearance and Wellness
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700s – Recreation and Instruction
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800s – Transportation and Delivery
What Counts as a Qualified Tip?
To claim the deduction, a worker must:
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Be employed in one of the listed tipped occupations, and
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Receive tips that meet the definition of “qualified tips.”
According to the proposed regulations, qualified tips include:
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Payments made in cash or cash equivalents, such as checks, credit/debit cards, gift cards, tokens that can be exchanged for cash, or electronic payments (excluding most digital assets).
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Tips received directly from customers or distributed through a tip-sharing arrangement, such as a tip pool.
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Voluntary payments made by customers.
Not qualified tips include:
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Automatic service charges (e.g., a restaurant’s mandatory 18% service fee for large parties, which is then shared among staff).
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Payments connected to illegal activities, prostitution, or pornographic services.
Next Steps
Workers in tipped industries, employers, and other stakeholders are encouraged to review the proposed regulations and submit comments before the October 23 deadline via Regulations.gov. This feedback will help shape the final rules that determine how the “no tax on tips” provision is applied.
Need Help with Your Taxes?
If you’re confused about the new tax laws, received a penalty notice from the IRS, or just need help filing your taxes, it’s best to work with a professional accounting firm like Morris and Associates. We can help you navigate the process and determine the best solution for your specific tax situation.
