Compliance
How the Final Regulations for “No Tax on Tips” Impact Tipped Workers
The IRS has issued final regulations defining “qualified tips” and published the occupations eligible under the “No Tax on Tips” provision, offering major savings for tipped employees and gig workers starting in tax year 2025.
By NomadicTax Research Team • 5-8 min read • April 29, 2026
## What’s Changed
The One, Big, Beautiful Bill (OBBB) introduced a provision (section 224) that allows **qualified tips** to be deducted from taxable income. On April 10, 2026, the IRS/Treasury issued **final regulations** that:
- Publish a **List of Occupations that Receive Tips**, identifying over 70 separate occupations that customarily and regularly receive tips as of **December 31, 2024**. Examples include bartenders, waitstaff, food servers non-restaurant, visual artists, floral designers, gas pump attendants, etc. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-final-regulations-listing-occupations-where-workers-customarily-and-regularly-receive-tips-under-the-one-big-beautiful-bill?utm_source=openai))
- Define what counts as “qualified tips” for deduction purposes. These include tips:
* Paid in cash or equivalent (credit card, mobile payment, or tokens exchangeable for cash)
* From customers or through tip-sharing arrangements
* Freely given—not mandatory service charges without customer choice to decline changes ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-final-regulations-listing-occupations-where-workers-customarily-and-regularly-receive-tips-under-the-one-big-beautiful-bill?utm_source=openai))
- Require tips to be reported via appropriate IRS forms: W-2, 1099-NEC/MISC/K, or Form 4137. Self-employed individuals are eligible if their occupation is on the published list and the usual requirements are met. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-final-regulations-listing-occupations-where-workers-customarily-and-regularly-receive-tips-under-the-one-big-beautiful-bill?utm_source=openai))
## Examples
- **Restaurant server** who reports $20,000 in tips via W-2 and credit card and works as a waiter (TTOC code 102 or 103 category) can now **deduct all those tips** as “qualified tips” on Schedule 1-A. If married filing jointly with someone also having tips, the combined cap is $25,000. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-final-regulations-listing-occupations-where-workers-customarily-and-regularly-receive-tips-under-the-one-big-beautiful-bill?utm_source=openai))
- **Self-employed music teacher** who gets tips through gig work, 1099-NEC payments, and operates in a covered occupation, can deduct tips up to their net income in that trade. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-final-regulations-listing-occupations-where-workers-customarily-and-regularly-receive-tips-under-the-one-big-beautiful-bill?utm_source=openai))
## Actionable Advice
- Determine if your **occupation appears on the list** (available on IRS.gov). If not, your tips won’t qualify. ([irs.gov](https://www.irs.gov/forms-pubs/occupations-that-customarily-and-regularly-received-tips-on-or-before-december-31-2024?utm_source=openai))
- Report all your tips properly: on the correct forms like W-2, 1099-NEC, etc. Also keep records of tip-sharing or pooling arrangements.
- Use the **$25,000 limit** (per return) fully—but understand high-income limits or exclusions may reduce or phase out the benefit. Cooling due to income thresholds may apply.
- For married couples: even if both have qualified tips, the **$25,000 cap** is **per return**, not per person. Combine carefully.
## Implications
- Many tipped workers will see **lower taxable income**, reducing their tax liability or increasing refunds.
- **Gig economy** participants may benefit if their work falls under one of the listed occupations and their tips are properly documented.
- Employers, payroll departments, and software providers will need to ensure that reporting forms and statements properly reflect tip income and satisfy regulatory requirements.
## Bottom Line
Starting with tax year 2025 (returns filed in 2026), if you’re in a covered occupation and report your tips correctly, you can access meaningful savings via the “No Tax on Tips” deduction. It’s critical to confirm your occupation status, keep good records, and file using the correct forms to fully benefit.