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New Tax Tip Deductions: Eligible Occupations Announced

On September 2, 2025, the Treasury Department announced an essential update for eligible professions under the new "No Tax on Tips" deduction. This crucial tax feature is part of the "One Big Beautiful Bill Act," which took effect on July 4, 2025, impacting federal income taxes from 2025 through 2028. 

The deduction caters to qualifying tipped workers with a ceiling of $25,000 in eligible tips annually. Classified as a "below-the-line" deduction, it is available to those taking the standard deduction but remains outside the scope of computing adjusted gross income (AGI).

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Here's an exploration into the proposed list of occupations:

Beverage & Food Service:

  • Bartenders
  • Wait staff
  • Food servers, non-restaurant
  • Cafeteria attendants and bartender helpers
  • Chefs and cooks
  • Food preparation workers
  • Fast Food and Counter Workers
  • Dishwashers
  • Host staff, restaurant, lounge, and coffee shop
  • Bakers 

Entertainment and Events:

  • Gambling dealers
  • Gambling change persons and booth cashiers
  • Dancers
  • Musicians and singers
  • Disc jockeys (not radio)
  • Entertainers and performers
  • Digital content creators
  • Ushers, lobby attendants, and ticket takers

Hospitality and Guest Services:

  • Baggage porters and bellhops
  • Concierges
  • Hotel, motel, and resort desk clerks
  • Maids and housekeeping cleaners

Home Services

  • Home maintenance and repair workers
  • Home landscaping and groundskeeping workers
  • Home electricians 
  • Home plumbers
  • Home heating/air conditioning mechanics and installers
  • Home appliance installers and repairers
  • Home cleaning service workers
  • Locksmiths
  • Roadside assistance workers
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Personal Services

  • Personal care and service workers
  • Private event planners
  • Private event and portrait photographers
  • Private event videographers
  • Event officiants
  • Pet caretakers
  • Tutors
  • Nannies and babysitters

Personal Appearance and Wellness:

  • Skincare specialists
  • Massage therapists
  • Barbers, hairdressers, hairstylists, and cosmetologists
  • Shampooers
  • Makeup artists
  • Exercise trainers and group fitness instructors
  • Tattoo artists and piercers
  • Tailors 
  • Shoe and leather workers and repairers

Recreation and Instruction:

  • Golf caddies
  • Self-enrichment teachers
  • Recreational and tour pilots
  • Tour guides and escorts
  • Sports and recreation instructors

Transportation and Delivery:

  • Parking and valet attendants
  • Taxi and rideshare drivers and chauffeurs
  • Goods delivery people
  • Personal vehicle and equipment cleaners
  • Private and charter bus drivers
  • Water taxi operators and charter boat workers
  • Home movers 

The "OBBB tip exclusion" offers a strategic opportunity for tax mitigation, designed for tipped workers over the 2025-2028 tax years. To leverage this deduction, the worker must satisfy these parameters:

Eligibility Requirements:

  • Be a qualified tipped worker: Must have received tips in their occupation before 2025.
  • Have qualified tips: Must be customer-paid and correctly reported.
  • Properly report tips: Use Form W-2 or 1099, as appropriate.
  • File jointly if married: A joint tax return is required for this deduction.
  • SSN requirement: Each claimant must include their SSN on their tax return. 
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Deduction Limitations: The deduction decreases for higher-income earners, phasing out beyond specific MAGI thresholds:

  • Maximum deduction: $25,000 annual cap.
  • Income phase-out: Begins at MAGI over $150,000 for singles and $300,000 for married couples.

Additional Insights:

  • Exclusion from payroll taxes: Though a deduction applies for federal income taxes, tips remain subject to Social Security, Medicare, or self-employment taxes.
  • Temporary provision: Expires on December 31, 2028.
  • Not an exemption: All tip income must still be reported but reduced by the deduction amount.
  • State tax considerations: State taxes depend on state-specific laws. 

For those impacted by these changes—namely workers and their employers—staying ahead of eligibility and optimizing tax strategies is vital. Embrace these measures thoughtfully to maximize benefits, and consult with tax professionals to navigate this dynamic landscape effectively. We're here to help with any inquiries.

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