If you work in a tipped occupation and felt like your refund was larger than usual (or you're still trying to figure out whether you qualified for the new deduction), you're not alone. The "No Tax on Tips" provision of the One Big Beautiful Bill Act allowed eligible workers to deduct up to $25,000 in qualified tip income from their 2025 federal return, but the rules around who qualifies and what counts as a "qualified tip" have been taking shape all year. The IRS recently issued its final regulations, so the picture is now much clearer.
First, your occupation has to be on the IRS's official list—and that list just got a little longer. The final regulations cover more than 70 tipped occupations across eight categories, from food and beverage service to transportation and delivery. Notably, visual artists, floral designers, and gas pump attendants were added in the final rules, so some workers who assumed they didn't qualify may actually be eligible. Tips must be voluntary—automatic service charges generally don't count unless the customer had a real option to change or waive them. Tips received through a tip pool do qualify, and the payment method is broad: cash, card, gift card, or mobile payment apps all count. If you're self-employed, you can still claim the deduction, but it's capped at your net income from the business where the tips were earned.
There's also a filing-status detail worth knowing: if you're married, you must file jointly to claim this deduction. Couples who typically file separately for other reasons, like managing student loan repayments or tax debt, may face a real trade-off. The deduction also phases out for individuals with modified adjusted gross income above $150,000, or $300,000 for joint filers. And while this deduction reduces your federal income tax, tips are still subject to Social Security and Medicare taxes regardless.
One more thing worth knowing: this deduction isn't going away anytime soon. The "No Tax on Tips" provision is in effect through tax year 2028, so if you work in a tipped occupation, there's potential planning opportunity here over the next few years. Feel free to reach out. Our goal is to help make your life #LessTaxing!