IRS Lists Tip-Worthy Jobs for Tax Deduction Clarity
Published Date: 4/13/2026
Rule
Summary
Starting June 12, 2026, the IRS officially lists which jobs regularly get tips and defines what counts as 'qualified tips' for tax deductions. If you earn tips in your job, this rule helps you know what tips you can deduct on your taxes, based on how things stood at the end of 2024. This update aims to keep tip deductions fair and clear, so you can keep more of your hard-earned cash without any guesswork!
Analyzed Economic Effects
7 provisions identified: 1 benefits, 5 costs, 1 mixed.
Official Tip-Job List Fixes Who Qualifies
The IRS published a final, fixed List of Occupations that customarily and regularly received tips on or before December 31, 2024. Only tips received in occupations on that official list count as "qualified tips" for the new tip deduction, so whether your job title appears on the list determines eligibility.
Tip Deduction Cap and Income Phaseout
The deduction for qualified tips is limited to a maximum of $25,000 per taxable year. The deduction phases out for taxpayers with modified adjusted gross income over $150,000, and the phaseout threshold is $300,000 for joint filers.
What Counts As Qualified Tips
Qualified tips must be cash tips received in an occupation on the IRS list and must be voluntary, not negotiated, and determined by the payor. For employees, qualified tips include tips paid in cash or charged and tips received under tip-sharing arrangements, but tips received in a "specified service trade or business" (per section 199A(d)(2)) are excluded.
Self-Employed Tip Deduction Limits
If you receive qualified tips in a trade or business you run yourself (not as an employee), you can take the deduction only to the extent your gross income from that business (including the tips) exceeds the deductions allocable to that business for the year.
New Tip Reporting for Contractors in 2026
Beginning in tax year 2026, information returns furnished to both independent contractors and employees will separately report certain tips. The IRS issued Notice 2025-62 (penalty relief for certain 2025 reporting) and Notice 2025-69 (guidance and transition relief for claiming the deduction for 2025).
Tip Deduction Does Not Lower Payroll Taxes
The section 224 deduction for qualified tips does not apply for FICA (Social Security/Medicare) or SECA purposes and is not taken into account for determining wages subject to FICA or net earnings subject to SECA.
Filing, SSN, and Sunset Rules for the Deduction
To claim the deduction you must include your Social Security number on your tax return and, if married, you must file a joint return; the deduction is not available for married individuals who file separately. The deduction is not allowed for taxable years beginning after December 31, 2028.
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