What jobs are eligible for ‘no tax on tips’ in 2025? Preliminary list might surprise you
Clowns entertain crowds at local fairs by twisting skinny balloons into poodles and swords. And now, the dollar bills thrown into that top hat on the ground could fall into the new “no tax on tips” bucket on 2025 federal income tax returns.
The same tax break on tips could apply to blackjack dealers at the casino — and plumbers, club dancers, washing machine installers, tow truck drivers, tattoo artists, taxi and rideshare drivers, math tutors, yoga instructors, golf caddies, airport shuttle drivers and more.
I know: Who tips the plumber? Or a tow truck driver?
Someone must, as those job are on a new, preliminary list for the “no tax on tips” tax break.
According to a 2021 article on BobVila.com, the home advice website of former TV host Bob Vila, “it’s important to understand that plumbers don’t expect you to tip them” and some companies forbid their employees from receiving tips. Even so, the article noted that tips for plumbers should start at about $20 for tasks like drain cleaning but increase with the complexity of the job. A larger tip between $100 and $200, according to the article, could be suitable for installing a new water line in the home.
As for tow truck drivers, AAA service providers in some places are allowed to accept tips, but it is never expected or required, according to Adrienne Woodland, a spokeswoman for AAA-The Auto Club Group.
A waiter takes an order from diners during the lunch hour at The Hamilton restaurant in Washington, DC, on July 2, 2025.
The tipping culture in the United States has expanded to so many services now that an official list was actually needed to decide who does and who doesn’t qualify for a new income tax break on tips.
We’re talking about tips that go way beyond the pizza delivery person, your hairdresser and wait staff at your favorite restaurant. Yes, those jobs qualify, too.
When it comes to eateries, for example, the tax deduction for tips also could apply to pastry chefs, food preparation workers, those who clear off tables, dishwashers, fast food workers, baristas, bartenders and others.
Some “no tax on tips” occupations that might surprise you: podcasters, social media influencers and house painters.
The U.S. Treasury Department has released its preliminary list of 68 occupations that “customarily and regularly received tips” on or before Dec. 31, 2024, that will apply to the tip-related tax deduction that is part the One Big Beautiful Bill Act.
By Oct. 2, the Internal Revenue Service must publish a list of occupations that qualify.
The idea of outlining jobs where tips were regularly received last year also eliminates the temptation to redefine how people are paid to qualify for a new tax break. Lawyers aren’t receiving tips as part of their payment — so lawyers are not mentioned on that list.
One area that I didn’t see covered, frankly, surprised me. This list has no mention of the newspaper home delivery person, someone who regularly receives a tip from our family.
There is a category for “goods delivery people.” The illustrative examples listed there are: “Pizza delivery driver, grocery delivery driver, bicycle courier, package delivery person, appliance delivery driver, furniture delivery person.”
Again, this is a preliminary list and we’ll see more details in the future.
“I would guess that this list is a first shot and is likely to be subject to modification as the IRS receives input following its release,” said Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting in Riverwoods, Illinois.
Luscombe said his newspaper is delivered by a person who drives a vehicle, so tips received for that service might qualify as “goods delivery people,” even though newspapers aren’t specifically mentioned.
Overall, though, Luscombe said the preliminary list appears intended to be a fairly broad list and not overly restrictive.
It’s important to note that the One Big Beautiful Bill Act, according to the Treasury Department, provides that “tips do not qualify for the deduction if they are received in the course of certain specified trades or businesses — including the fields of health, performing arts and athletics.”
The Treasury Department and the IRS anticipate issuing more guidance on those types of occupations and trades or businesses.
Another key question to ask: Are you required to give a tip?
No one is required to toss money at a clown or another street performer or hand over a tip to a plumber. But how often have you been handed a bill at a restaurant that includes a 20% mandatory tip?
In those cases, some restaurant employees may not be too happy when it comes to some rules associated with “no taxes on tips.”
As a result, many tax experts warn that “mandatory tips,” including those when a restaurant automatically adds a 20% service charge, aren’t likely to be eligible for the new tip income tax deduction.
Say the mandatory tip is $20 on a $100 dinner, according to tax experts, the $20 is not likely to be eligible for the tax deduction on tips. If the server receives $25 as a tip in that example — or $5 above the mandatory tip — the $5 could be eligible for the tax break, according to the experts.
The IRS has yet to offer official guidance that specifically excludes mandatory service fees from being eligible for the tax deduction for tip income. But tax professionals see the writing on the wall.
The new, special tax break on tips is retroactive and applies to eligible tip income earned in all of 2025. Again, you’d need to work in a job that qualifies as one where people regularly received tips last year.
Nothing, of course, can be boiled down to four simple words — “no tax on tips” — when it comes to taxes.
Taxes on all tips aren’t being eliminated. And you’d need to report income from your tips to qualify for the tax deduction.
Eligible workers would be able deduct up to $25,000 in tips per return, according to tax experts.
The deduction reduces your taxable income. According to an example given by the Bipartisan Policy Center, a single taxpayer earning $50,000 — including $5,000 in tips — could save $600 with the new tax deduction on tip income.
Employers still are required to withhold taxes from each paycheck for Social Security and Medicare, which are referred to as FICA or payroll taxes. Workers still must report all tips to their employers if they total $20 or more in a single month.
What’s straightforward:
Taxpayers must file jointly if married to claim a deduction for the income earned from tips.
Those with higher incomes will receive a smaller tax break or none at all, depending on their income. The deduction relating to taxes on tips phases out, or gets smaller, for taxpayers with modified adjusted gross income over $150,000 if single or above $300,000 for married couples filing a joint return.
The deduction phases out at a rate of $100 for each $1,000 over the threshold.
The “no tax on tips” tax break completely phases out when one’s modified adjusted gross income is $400,000 for single filers and $550,000 for married couples filing a joint return.
Like with many new tax breaks, taxpayers must include a valid Social Security number on the return.
We are talking about tax breaks on cash tips, not gifts received. What’s considered a noncash tip is still considered as taxable income by the IRS.
The special deduction can save tax dollars for those who itemize their deductions or claim the standard deduction, as most people do these days. The tax break runs from 2025 through 2028.
Contact personal finance columnist Susan Tompor: stompor@freepress.com. Follow her on X @tompor.
