Who Qualifies for the New Tip Deduction?

Last week, we covered the new tip deduction starting in 2025—up to $25,000 of your qualified tips can reduce your taxable income.

But here’s the catch: not everyone who receives tips automatically qualifies. And as of today, we are still waiting for IRS guidance to fully define who can claim this deduction.

Here’s what we know so far:

• Your tips must come from an occupation where tipping is customary.

• The tips must be voluntary, not a mandatory service charge.

• Tip-sharing arrangements still count as long as they are reported properly.

• In recent guidance, the IRS plans to publish an official list of qualifying occupations by October 2, 2025.

Take Action:

If you earn tips, start tracking and documenting them today. Accurate records ensure you will be ready to claim the deduction once the IRS confirms your occupation is eligible.

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 break down what counts as a tip—and what doesn’t.

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.