Street performers and other unique occupations are set to benefit from a new proposal from the IRS, which outlines eligibility for receiving up to $25,000 in tax-free tips. This development is part of the One Big Beautiful Bill Act (OBBBA), which permits the deduction, with federal regulators now refining the specifics. More than 70 different professions are included in this proposal, highlighting the diverse range of workers who may qualify.
Traditional roles like restaurant servers, bartenders, and taxi drivers are included, but the list also embraces more niche categories such as clowns, street performers, club dancers, and even lawn care workers. Other unexpected entries include plumbers, golf caddies, babysitters, rickshaw drivers, and water taxi drivers.
The IRS has clarified the qualifications for what constitutes a “qualified” tip. Eligible tips must be paid in cash or cash equivalents—this includes checks, credit cards, debit cards, and gift cards. Notably, while casino chips are acceptable, cryptocurrencies such as Bitcoin are excluded from this tax-free treatment.
For a tip to be deemed qualified, it must be given voluntarily without negotiation, and certain service charges will not qualify. For example, if a restaurant automatically adds an 18% service charge for large groups that cannot be altered or canceled by the customers, this charge would not qualify as a tip.
Additionally, tips received for illegal activities, including those related to prostitution or pornography, are also disqualified from tax-free status. The IRS’s proposal specifies that the tax-free tip provision will be available only from 2025 through 2028, and it will diminish for higher-income individuals, phasing out for single taxpayers earning over $150,000 and for married couples filing jointly with incomes exceeding $300,000.
The public has a 30-day window to provide feedback on these proposed rules at regulations.gov, marking a key opportunity for individuals and organizations across the eligible professions to voice their opinions on this significant policy change.
