New IRS Guidance for Tipped Workers

The IRS recently released new guidance under the One Big Beautiful Bill (OBBB) identifying which occupations “customarily and regularly receive tips.”

This list helps clarify who may be eligible for the new tips-deduction provision introduced by the law.

Who it affects:

Workers in industries where tipping is common — including food service, hospitality, personal care, recreation, home services, and delivery.

The IRS guidance lists almost 70 occupations, grouped into broader categories such as:

• Beverage & Food Services (servers, bartenders, baristas)

• Personal Appearance & Wellness (hairstylists, nail technicians, massage therapists)

• Transportation & Delivery (drivers, valets, goods delivery workers)

• Entertainment & Events (performance or event staff)

• And much more. See the full list for details or consult with your tax professional.

Here is a link to the most recent guidance and included occupations: IRS Update

What counts as a tip:

• It must be voluntarily given by the customer.

• It can be cash, card, digital payment, or equivalent.

• It can’t be automatically added as a service charge.

This guidance gives workers and employers a clearer picture of who qualifies for the tips deduction.

There is still room for further interpretation by the IRS, so stay tuned for updates and any changes. Check out previous issues of the Tax Minute for more information about the Tips Deduction.

Each week, I share a clear, bite-sized tax insight straight from my continuing education so you can stay informed without sifting through tax changes.

Next week, we start a new series about the benefits and use of a Roth IRA.

Thanks for reading,

Brandy Sparkman, EA

I’ll keep learning so you can stay focused on what you do best.

See you next week for another Tax Minute.