Treasury Expands “No Tax on Tips”: 68 Occupations Qualify Under Draft Rules

The IRS and Treasury have released a draft list of occupations eligible for the new “no tax on tips” benefit created by the One Big Beautiful Bill (OBBB). The expansion covers an unexpectedly wide range of workers from bartenders and servers to golf caddies, DJs, and even electricians. For CPAs and payroll teams, these draft rules mark a critical compliance shift that could affect millions of workers nationwide.

What Happened

• Treasury’s draft regulations identify 68 occupations across industries including:

  • Food & Hospitality: servers, bartenders, baristas, hotel staff.

  • Entertainment & Recreation: DJs, musicians, golf caddies, tour guides.

  • Personal Services: hairdressers, nail technicians, massage therapists.

  • Other Trades: electricians, digital content creators, and more.

• Eligible workers can deduct up to $25,000 in qualifying tip income annually from federal taxation.

• The draft rules also propose updates to Form W-2 reporting, requiring employers to track and disclose exempt tip income separately.

  
  

Why It Matters

1. Broad Worker Relief: Millions of service-industry professionals could see meaningful increases in after-tax income.

2. Employer Responsibility: Businesses must update payroll systems to track tip income separately and issue revised W-2s.

3. Compliance Complexity: CPAs will need to clarify eligibility for clients whose occupations fall near the margins of Treasury’s list.

4. Economic Impacts: This deduction could reshape tipping culture, employee retention, and compensation structures in service-heavy industries.

   
   

Implications for CPAs and Advisors

• Review Client Eligibility: Confirm whether self-employed workers (e.g., DJs, independent contractors) qualify and how they should document tips.

• Educate Employers: Ensure payroll teams understand the need for revised reporting and system updates.

• Plan Strategically: Advise clients on maximizing the benefit while avoiding underreporting risks.

  
  

Looking Ahead

The rules are currently in draft form and open for public comment. Final regulations are expected later this year, but employers and tax professionals should begin preparing now. The scope of occupations included suggests Treasury is casting a wide net, potentially signaling further expansion in future guidance.

Stay Ahead of Federal Tax Shifts

Tax benefits like “No Tax on Tips” can significantly impact both workers and employers but only if compliance is managed correctly.

👉 Try Bizora today to track regulatory updates and guide your clients through evolving tax rules.