A significant update to the tax code has been introduced with the One Big Beautiful Bill Act (OBBBA), which was signed into law by President Donald Trump on July 4, 2025. This act not only marks the permanence of several tax cuts established in the 2017 Tax Cuts and Jobs Act but also introduces new temporary deductions, notably the controversial “no tax on tips” provision.
This new provision allows individuals whose jobs traditionally involve receiving tips to deduct their tip income from their taxable income for the tax years 2025 through 2028. It is essential to note that this deduction applies only to those who were engaged in such roles before December 31, 2024.
The Treasury has compiled a preliminary list of 68 eligible occupations. The list includes job titles that span various sectors, which may come as a surprise to many. Here are the primary categories and examples of eligible occupations:
### Beverage & Food Service
Roles like bartenders, wait staff, non-restaurant food servers, chefs, and fast food workers are included. Also noteworthy is the inclusion of dishwashers and host staff.
### Entertainment & Events
Occupations such as gambling dealers, dancers, musicians, and digital content creators fall under this category. Even roles as unique as street performers are eligible.
### Hospitality & Guest Services
Baggage porters, concierges, and hotel desk clerks are among those listed, reflecting the broad nature of the hospitality industry.
### Home Services
This category covers home maintenance workers—such as handymen and electricians—as well as cleaners and locksmiths.
### Personal Services
Roles including personal aides, event planners, photographers, and pet caretakers qualify for the deduction.
### Personal Appearance & Wellness
Skincare specialists, massage therapists, and hairdressers also gain eligibility under this deduction.
### Recreation & Instruction
Golf caddies, tour guides, and sports instructors are recognized as well.
### Transportation & Delivery
Various roles such as taxi drivers, delivery personnel, and parking attendants qualify.
### Who Won’t Qualify?
Notably, self-employed individuals in specific service trades, including doctors, lawyers, and consultants, are not eligible for this deduction. While the list is extensive, only those engaged in qualifying tip-receiving occupations can claim the benefit.
The process for claiming this deduction requires submitting a Social Security Number, and there are phase-out limits based on income levels. Specifically, individuals with modified adjusted gross income above $150,000 ($300,000 for joint filers) will find the deduction gradually reduced.
The deduction itself is limited to $25,000 of reported qualified tips, which can be cash or charged tips from customers. Self-employed individuals can also benefit, although the deduction cannot surpass their net income from the related business.
While this provision aims to help eligible workers significantly, there are detailed requirements to be met. Tips must be paid voluntarily, meaning mandatory service charges do not qualify. The IRS is expected to issue additional guidelines to address potential misuse of the deduction.
There will be no changes to Form W-2 for the 2025 tax year, although future forms will incorporate new box codes relevant to these deductions. The IRS is committed to providing transition relief for both taxpayers and employers in light of these new regulations.
As further clarification on OBBBA emerges, tax professionals and impacted individuals are encouraged to stay informed and may consider subscribing to newsletters or updates from reliable tax sources to keep abreast of any changes or additional guidance.
