The US Department of the Treasury and the Internal Revenue Service (IRS) have finalised regulations for the “No Tax on Tips” provision, outlining who can claim a deduction on tips.
The rules, issued under the One, Big, Beautiful Bill, formalise a list of occupations that typically receive tips and define “qualified tips” for purposes of the new tax benefit.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
IRS CEO Frank J. Bisignano said: “Taxpayers are already benefiting from No Tax on Tips since the IRS already is issuing refunds to eligible workers.
“Given the wide variety of workers who receive tips, these final regulations help implement an important tax benefit for American workers.”
The final text includes more than 70 occupations in which tipping is common, covering roles from bartenders to water taxi operators.
Each job on the List of Occupations that Receive Tips is organised under the Treasury Tipped Occupation Code, which assigns a three-digit code and description.
Codes in the 100s cover beverage and food service, the 200s cover entertainment and events, and the 300s relate to hospitality and guest services.
Codes in the 400s apply to home services, the 500s to personal services, and the 600s to personal appearance and wellness.
Occupations in the 700s fall under recreation and instruction, while the 800s category is for transportation and delivery.
Visual artists and floral designers are now classified in the personal services grouping. Gas pump attendants have been added to the transportation and delivery category.
The rules state that only “qualified tips” can be used to claim the deduction. The tip must be received by someone working in an occupation that appears on the official List of Occupations that Receive Tips.
The regulations specify that tips must come from customers, or in the case of employees, via a required or voluntary tip-sharing mechanism such as a tip pool.
In addition, the amount must be freely decided by the customer and not negotiated.
The regulations make clear that gig workers and other self-employed individuals can also benefit, provided their occupation is on the List of Occupations that Receive Tips and they satisfy the other legal and regulatory conditions.
For self-employed individuals, the law restricts deduction so that it cannot exceed the person’s net income.
