IRS issues guidance on “tip” professions in Big Beautiful Bill

The US Department of the Treasury and the IRS have provided guidance on “no tax on tips” provision of the One Big Beautiful Bill. The proposed regulations identify occupations customarily and regularly receive tips and define “qualified tips” eligible taxpayers may claim as a deduction. The proposed regulations list nearly 70 separate occupations of tipped workers, from bartenders to water taxi operators.

The Treasury and the IRS request comments from the public within 30 days to be made through Regulations.gov. Complete instructions on submitting comments can be found in the proposed regulations. Comments on the proposed regulations are due by Oct. 23, 2025.

List of occupations that receive tips

The Treasury Tipped Occupation Code provides a three-digit code and descriptions for the occupations listed within the proposed regulations. The proposed regulations group the occupations into eight categories:

• 100s – Beverage and Food Service
• 200s – Entertainment and Events
• 300s – Hospitality and Guest Services
• 400s – Home Services
• 500s – Personal Services
• 600s – Personal Appearance and Wellness
• 700s – Recreation and Instruction
• 800s – Transportation and Delivery

Definition of qualified tips

In order to claim the deduction, a worker must both be in an occupation on the list and receive qualified tips. The proposed regulations provide a definition of qualified and not qualified tips which includes the following factors:

• Qualified tips must be paid in cash or an equivalent medium, such as check, credit card, debit card, gift card, tangible or intangible tokens that are readily exchangeable for a fixed amount in cash, or another form of electronic settlement or mobile payment application, excluding most digital assets, denominated in cash.
• Qualified tips must be received from customers or, in the case of an employee, through a mandatory or voluntary tip-sharing arrangement, such as a tip pool.
• Qualified tips must be paid voluntarily by the customer and not be subject to negotiation. Qualified tips do not include some service charges. For example, in the case of a restaurant that imposes an automatic 18% service charge for large parties and distributes that amount to waiters, bussers, and kitchen staff, if the charge is added with no option for the customer to disregard or modify it, the amounts distributed to the workers from it are not qualified tips.
• Any amount received for illegal activity, prostitution services, or pornographic activity is not a qualified tip.

For more information related to the Big Beautiful Bill, watch the replay of a recent webinar that summarized the Bill and provided guidance on tax matters, and the growing article library of articles on the Bill at the Intuit® Tax Pro Center.

Source: IRS