If you work in a profession where tips make up a significant part of your income, the new “no tax on tips” provision in the OBBB Act could directly impact your finances. To help workers, employers, and small business owners navigate these changes, the Treasury Department and IRS released a preliminary list of occupations that customarily and regularly received tips on or before December 31, 2024. This list offers an early look at the roles likely to qualify, ranging from restaurant staff and hospitality workers to personal services, entertainment, and even certain home service providers.

Thanks to recent legislative updates under the One Big Beautiful Bill Act (OBBBA), the scope of what these accounts can cover has grown significantly.

Click the downloadable PDF link below to view the preliminary list of tipped occupations here:

Occupations That Customarily and Regularly Received Tips on or Before December 31, 2024

Why This Matters & What to Know

The “no tax on tips” provision in the OBBB Act isn’t just a technical change, it has real financial and operational implications:

Tips Must Be Voluntary

Mandatory gratuity tips are not considered qualified tips and therefore cannot be claimed as a deduction under the new tax law.

Qualified Tips May Become Non-Taxable Income

If you work in one of the listed tipped occupations and receive tips that meet the Act’s criteria, those tips would no longer be included in your taxable income. This means:

• You won’t owe federal income tax on qualifying tips.
• Your take-home pay increases because less is withheld or owed at tax time.

State and Local Taxes May Differ

The federal change doesn’t automatically apply to state or local income taxes. States must decide whether to conform to the federal rule or continue taxing tips. Workers and businesses should monitor their state tax authorities for guidance.

Employer Payroll Reporting Will Change

Employers of qualified tipped workers (restaurants, spas, casinos, hotels, home-service businesses) will need to adjust payroll systems, W-2 reporting, withholdings and estimated tax payments.

Business Planning for Employers

Restaurants, salons, event companies, and home service providers may need to adjust payroll systems, training, and employee communication to ensure compliance and to properly classify tipped roles.

Contact GFG to learn more about how this may impact your tax planning.

Resources:

One, Big, Beautiful Bill Act: Tax deductions for working Americans and seniors