IRS, Treasury Release Details About ‘No Tax On Tips’ Deduction

Authored by Jack Phillips via The Epoch Times (emphasis ours),

The U.S. Treasury Department and IRS on Sept. 19 released details about a provision backed by the Trump administration and Republicans, passed by Congress earlier this year, that would provide a tax break for many employees who receive cash tips.

In a document released on the Federal Register’s website, the agencies outlined what type of jobs and what type of tips are eligible under the new regulations, which were passed as part of the One Big Beautiful Bill Act in July.

It stipulates that people earning a tipped income can deduct as much as $25,000 per year under the measure, instructing the IRS and Treasury Department to find what jobs could qualify. Nearly 70 jobs were eligible for the tax break under guidance that was released earlier this month, while the tax deduction will apply for the tax year 2025, up to Dec. 31 of this year, according to the proposed rules.

“For taxable years beginning after December 31, 2024, and before January 1, 2029, employees and self-employed individuals may deduct qualified tips from their gross income when calculating their Federal income tax liability,” the proposal stated, adding that qualified tips refer to cash tips that were received by a person in the covered occupations “on or before December 31, 2024, as provided by the Secretary.”

On Sept. 3, the Treasury Department floated a list of jobs that will likely be eligible under the new rules.

The draft uploaded on Friday is open for comment through the Federal Register’s website. The IRS and Treasury will finalize the rules in early October, the document said, which includes the official proposed list of jobs eligible under the measure. The agencies did not specify a timeline.

The proposal noted that the official list of jobs would be roughly the same as the Treasury list that was released on Sept. 3.

Occupations include taxi drivers, rideshare drivers, valets, servers, bartenders, hosts and hostesses, chefs, cooks, dishwashers, bellhops, porters, concierges, housekeepers, hotel desk clerks, tour guides, golf caddies, movers, delivery drivers, barbers, digital content creators, casino employees, card dealers, musicians, ushers, locksmiths, repair workers, cleaners, singers, DJs, massage therapists, tattoo artists, bussers, hairstylists and others.

“The Treasury Department and the IRS consulted data from surveys conducted in years 2017, 2019, and 2023” that had inquired about tips received in recent years, the recent proposal states.

“The occupations identified as having customarily and regularly received tips based on this survey data were largely consistent with those identified by the confidential tax return data,” the agencies added.

During the 2024 campaign, President Donald Trump and some Republicans campaigned, in part, on eliminating taxes on tips. Last year, Trump told supporters in Nevada that if he were elected, he would remove taxes on tips, while his opponent from the Democratic Party, Kamala Harris, later said she would support the measure.

Under the current tax code, tips of $20 or more received by an employee in any month from one job are treated as wages subject to withholding.

Cash tips include those received directly from customers, via credit and debit card charges that are distributed to an employee, or via a tip-sharing arrangement. Employees must keep a daily record of tips received and report these to their employer.

Reuters contributed to this report.