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Quick Hits
- The IRS has finalized regulations allowing eligible workers in more than seventy qualifying occupations to take a deduction for “qualified tips” from their taxable income.
- The final regulations clarify that “qualified tips” must be “cash tips” voluntarily paid by customers without conditions and excludes automatic gratuities.
- The final regulations introduce a revised approach to anti-abuse rules for tips, implementing a facts-and-circumstances test rather than a blanket prohibition for tip recipients with ownership interests.
- The list expands the list of qualifying occupations.
The final regulations, titled “Occupations that Customarily and Regularly Received Tips; Definition of Qualified Tips,” are set to be formally published in the Federal Register on April 13, 2026.
The final regulations, which followed more than 300 comments and a public hearing in October 2025 on the proposed regulations issued in September 2025, largely track the proposed regulations for the “No Tax on Tips” provision of the OBBBA. The regulations allow eligible workers—including both those who itemize their taxes and do not—who work in an expanded list of seventy-one specified occupations that “customarily and regularly” receive tips to deduct up to $25,000 per year in tips as a tax deduction. They apply to taxable years beginning after December 31, 2024, and before January 1, 2029.
Qualified Tips Defined
The final regulations clarify that “qualified tips” are “amounts received as cash tips” by “individuals” in “occupation[s] that customarily and regularly receive[] tips” as outlined in the regulations. The tips “must be paid voluntarily,” meaning they are paid without consequence for nonpayment, are not negotiable, and are determined by “payors” (i.e., customers). Tips received for illegal activities, prostitution, and pornographic activity are also excluded.
Voluntariness
Qualified tips do not include automatic gratuities or surcharges. Notably, the IRS and Treasury rejected calls for a transition rule concerning automatic gratuities paid in 2025. The regulations include an example of a restaurant with a menu that specifies an automatic 18 percent charge for parties of six or more. Such a charge would not be a qualified tip for purposes of a deduction. The final language was also modified to make clear that customers must have the option to reduce a tip amount to zero. The regulations include an example of customers being presented with a handheld point-of-sale (POS) device that must include an option to leave “no tip” or move a tip slider down to zero for the amount paid to constitute a qualified tip.
Cash Tips
The definition of “cash tips” remains largely unchanged from the proposed regulations—which includes tips paid by electronic payments, checks, debit cards, gift cards, or “intangible or tangible tokens,” such as “casino chips”—except that it is expanded to include “foreign currency.” The IRS and Treasury declined to reconsider whether digital assets, including “stablecoins,” would be considered “cash tips,” deferring to forthcoming regulations under the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act).
Managers and Tip Pools
The final regulations provide that tips “received by a manager or supervisor through a voluntary or mandatory tip-sharing arrangement, such as a tip pool, are not qualified tips.” However, the final regulations state that “amounts received directly by a supervisor or manager for services they provided in the course of duties performed in an occupation that customarily and regularly received tips … are qualified tips if all other requirements … are met.”
Anti-Abuse Rules
The final regulations revise the proposed rule’s blanket prohibition on tips paid to individuals with an ownership interest in or employed by the payor, replacing it with a facts-and-circumstances test for recharacterization of wages or payments as tips. The final regulations create an “irrebuttable presumption” of recharacterization when: (a) “the employer is the payor” of the tip, or (b) “the tip recipient has a direct ownership interest in the payor.”
List of Occupations That Receive Tips
The final regulations list “[o]ccupations that customarily and regularly received tips,” broken into eight categories, and assign a three-digit Treasury Tipped Occupation Code (TTOC) for reporting tips on Form W-2 in Box 14b.
Occupations Expanded
The final regulations keep all the same occupations from the proposed list and add new occupations: “Visual Artists” (TTOC 509), “Floral Designers” (TTOC 510), and “Gas Pump Attendant” (TTOC 810). “Food Servers, Non-restaurant” was renamed to “Food and Beverage Servers, Non-restaurant,” and “Pet Caretaker” was revised to “Pet and Show Animal Caretaker,” and “Eyebrow Threading and Waxing Technicians” was renamed to “Eyebrow and Eyelash Technicians” (TTOC 606) to include eyelash services.
Several prior categories were expanded, including clarifications that residential building doormen qualify as “Baggage Porters and Bellhops” (TTOC 301) or “Concierges” (TTOC 302), and residential building maintenance workers (ostensibly superintendents) qualify under “Home Maintenance and Repair Workers” (TTOC 401).
Notably, the illustrative examples for “Goods Delivery People” (TTOC 804) added “app/platform based delivery person” to address comments that the prior definition may have excluded “app-based delivery workers (also called gig economy delivery drivers).”
Further, examples for “Digital Content Creators” (TTOC 209) add new examples distinguishing between payments that provide access to content, which constitute compensation, not tips, and voluntary payments made after accessing content, which constitute qualified tips. It also clarifies that amounts retained by host platforms are not qualified tips.
Final List of Qualifying Occupations
| Beverage and Food Service (100s) | |
| TTOC | Occupation Title |
| 101 | Bartenders |
| 102 | Wait Staff |
| 103 | Food or Beverage Servers, Non-restaurant |
| 104 | Dining Room and Cafeteria Attendants and Bartender Helpers |
| 105 | Chefs and Cooks |
| 106 | Food Preparation Workers |
| 107 | Fast Food and Counter Workers |
| 108 | Dishwashers |
| 109 | Host Staff, Restaurant, Lounge, and Coffee Shop |
| 110 | Bakers |
| Entertainment and Events (200s) | |
| TTOC | Occupation Title |
| 201 | Gambling Dealers |
| 202 | Gambling Change Persons and Booth Cashiers |
| 203 | Gambling Cage Workers |
| 204 | Gambling and Sports Book Writers and Runners |
| 205 | Dancers |
| 206 | Musicians and Singers |
| 207 | Disc Jockeys, Except Radio |
| 208 | Entertainers and Performers |
| 209 | Digital Content Creators |
| 210 | Ushers, Lobby Attendants, and Ticket Takers |
| 211 | Locker Room, Coatroom, and Dressing Room Attendants |
| Hospitality and Guest Services (300s) | |
| TTOC | Occupation Title |
| 301 | Baggage Porters and Bellhops |
| 302 | Concierges |
| 303 | Hotel, Motel, and Resort Desk Clerks |
| 304 | Maids and Housekeeping Cleaners |
| Home Services (400s) | |
| TTOC | Occupation Title |
| 401 | Home Maintenance and Repair Workers |
| 402 | Home Landscaping and Groundskeeping Workers |
| 403 | Home Electricians |
| 404 | Home Plumbers |
| 405 | Home Heating and Air Conditioning Mechanics and Installers |
| 406 | Home Appliance Installers and Repairers |
| 407 | Home Cleaning Service Workers |
| 408 | Locksmiths |
| 409 | Roadside Assistance Workers |
| Personal Services (500s) | |
| TTOC | Occupation Title |
| 501 | Personal Care and Service Workers |
| 502 | Private Event Planners |
| 503 | Private Event and Portrait Photographers |
| 504 | Private Event Videographers |
| 505 | Event Officiants |
| 506 | Pet and Show Animal Caretakers |
| 507 | Tutors |
| 508 | Nannies and Babysitters |
| 509 | Visual Artists |
| 510 | Floral Designers |
| Personal Appearance and Wellness (600s) | |
| TTOC | Occupation Title |
| 601 | Skincare Specialists |
| 602 | Massage Therapists |
| 603 | Barbers, Hairdressers, Hairstylists, and Cosmetologists |
| 604 | Shampooers |
| 605 | Manicurists and Pedicurists |
| 606 | Eyebrow and Eyelash Technicians |
| 607 | Makeup Artists |
| 608 | Exercise Trainers and Group Fitness Instructors |
| 609 | Tattoo Artists and Piercers |
| 610 | Tailors |
| 611 | Shoe and Leather Workers and Repairers |
| Recreation and Instruction (700s) | |
| TTOC | Occupation Title |
| 701 | Golf Caddies |
| 702 | Self-Enrichment Teachers |
| 703 | Recreational and Tour Pilots |
| 704 | Tour Guides |
| 705 | Travel Guides |
| 706 | Sports and Recreation Instructors |
| Transportation and Delivery (800s) | |
| TTOC | Occupation Title |
| 801 | Parking and Valet Attendants |
| 802 | Taxi and Rideshare Drivers and Chauffeurs |
| 803 | Shuttle Drivers |
| 804 | Goods Delivery People |
| 805 | Personal Vehicle and Equipment Cleaners |
| 806 | Private and Charter Bus Drivers |
| 807 | Water Taxi Operators and Charter Boat Workers |
| 808 | Rickshaw, Pedicab, and Carriage Drivers |
| 809 | Home Movers |
| 810 | Gas Pump Attendants |
Next Steps
Employers may want to review the final rules and the list of occupations eligible for the “No Tax on Tips” deduction. Employers and employees share responsibility for determining eligibility: “Taxpayers wishing to claim the deduction and entities responsible for information reporting [i.e., employers] are primarily responsible for ensuring their occupation is on the List of Occupations that Receive Tips.” Further, employers may want to note that the deduction applies only for individual income tax purposes and does not adjust employers’ payroll tax withholding or remittances.
Ogletree Deakins’ Employment Tax Practice Group will continue to monitor developments and will provide updates on the Employment Tax, Hospitality, Retail, Sports and Entertainment, and Wage and Hour blogs as additional information becomes available.
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