The One Big Beautiful Bill Act (OBBBA) makes tip income “tax-free.” But as with any new tax law, the fine print matters, and some of these details still need clarification.
From January 1, 2025 through December 31, 2028 you can deduct up to $25,000 as a deduction equal to the amount of qualified tips you receive during the year. These tips must be included on IRS approved statements furnished to the individual to take advantage of the deduction.
There is an income limit of $150,000 for single filers and $300,000 for joint filers. This income limit is modified adjusted gross income, including the tips. The deduction amount is reduced (but not lower than zero) by $100 for each $1,000 in excess of these amounts.
In late September 2025, the Treasury Department released a preliminary list of qualifying occupations that may be eligible for the new tax-free tip provision. This list is open for public comment until October 22, 2025, before being finalized. If your occupation is not listed, you can submit a public comment requesting it to be added before the rule is finalized.
Stay informed by visiting our Tax Reform Resource Center at AlloySilverstein.com/tax-reform.
The Treasury has proposed a new Treasury Tipped Occupation Code (TTOC) system to identify which jobs qualify. The occupations fall under these broad categories:
Beverage & Food Service (100s)
Entertainment & Events (200s)
Hospitality & Guest Services (300s)
Home Services (400s)
Personal Services (500s)
Personal Appearance & Wellness (600s)
Recreation & Instruction (700s)
Transportation & Delivery (800s)
The final list will determine which occupations are eligible to claim tax-free tip income on 2025–2028 tax returns.
If you think you may qualify for this deduction, start getting your tip records in order now. The Treasury and IRS will finalize the qualifying occupation list and related filing codes after the comment period ends on October 22, 2025. Have questions? Contact us to review your financials together.
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