[Federal Register Volume 90, Number 181 (Monday, September 22, 2025)] [Proposed Rules] [Pages 45340-45361] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 2025-18278] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [REG-110032-25] RIN 1545-BR63 Occupations That Customarily and Regularly Received Tips; Definition of Qualified Tips AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking and public hearing. ----------------------------------------------------------------------- SUMMARY: This document contains proposed regulations that identify occupations that customarily and regularly received tips on or before December 31, 2024, and provide a definition of ``qualified tips'' for purposes of the income tax deduction for qualified tips. These proposed regulations affect individuals who receive tips as part of their occupation. DATES: Written or electronic comments must be received by October 22, 2025. The public hearing is being held on October 23, 2025, at 10 a.m. Eastern Time (ET). Requests to speak and outlines of topics to be discussed at the public hearing must be received by October 22, 2025. If no outlines are [[Page 45341]] received by October 22, 2025, the public hearing will be cancelled. Requests to attend the public hearing must be received by 5 p.m. ET on October 21, 2023. ADDRESSES: Commenters are strongly encouraged to submit public comments electronically via the Federal eRulemaking Portal at https://www.regulations.gov (indicate IRS and REG-110032-25) by following the online instructions for submitting comments. Requests for a public hearing must be submitted as prescribed in the ``Comments and Public Hearing'' section. Once submitted to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. The Department of the Treasury (Treasury Department) and the IRS will publish for public availability any comments submitted to the IRS's public docket. Send paper submissions to: CC:PA:01:PR (REG-110032-25), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. FOR FURTHER INFORMATION CONTACT: Concerning these proposed regulations, Stephanie Caden or Andrew Holubeck at (202) 317-4774; concerning submission of comments or the public hearing, please contact Publications and Regulations Section at (202) 317-6901 (not toll-free numbers) or by email at [email protected] (preferred). SUPPLEMENTARY INFORMATION: Authority This notice of proposed rulemaking contains proposed amendments that would add new regulations to the Income Tax Regulations (26 CFR part 1) under section 224 of the Internal Revenue Code (Code) related to the deduction for qualified tips. The proposed regulations are issued under the authority conferred by section 70201(h) of Public Law 119-21, 139 Stat. 72 (July 4, 2025), commonly known as the One, Big, Beautiful Bill Act (OBBBA), which requires that, not later than 90 days after the date of the enactment of the OBBBA, the Secretary of the Treasury or the Secretary's delegate (Secretary) publish a list of occupations that customarily and regularly received tips on or before December 31, 2024, for purposes of section 224(d)(1) of the Code. The proposed regulations are also issued under the authority in section 224(d)(2)(C), which provides that ``qualified tips'' do not include any amount received by an individual unless such other requirements as may be established by the Secretary in regulations or other guidance are satisfied, and section 224(g) of the Code, which instructs the Secretary to prescribe such regulations or other guidance as may be necessary to prevent reclassification of income as qualified tips, including regulations or other guidance to prevent abuse of the deduction allowed by section 224. In addition, the proposed regulations are also issued under the authority of section 7805(a) of the Code, which authorizes the Secretary to prescribe all needful rules and regulations for the enforcement of the Code, including all rules and regulations as may be necessary by reason of any alteration of law in relation to internal revenue. Background Under section 61(a), amounts received by individuals as tips are included in gross income and subject to income tax. Treasury regulations under section 61 provide that ``[w]ages, salaries . . . [and] tips . . . are income to the recipients unless excluded by law.'' See Sec. 1.61-2(a).\1\ --------------------------------------------------------------------------- \1\ Under section 3121(q), tips are also considered wages for Federal Insurance Contributions Act (FICA) purposes. However, the deduction under section 224 does not apply for FICA purposes and is not taken into account in determining wages subject to FICA tax. Similarly, the deduction under section 224 does not apply for Self- Employment Contributions Act (SECA) purposes and is not taken into account for purposes of determining net earnings subject to SECA tax. --------------------------------------------------------------------------- Section 63(a) defines taxable income as gross income minus allowable deductions (other than the standard deduction). Section 63(b) provides that, in the case of an individual who does not elect to itemize deductions for the taxable year, taxable income means adjusted gross income reduced by the standard deduction and certain other enumerated deductions. Section 70201(a) of the OBBBA added new section 224 to the Code providing an income tax deduction for ``qualified tips'' that are received during the taxable year by individuals in an occupation that customarily and regularly received tips on or before December 31, 2024. Section 70201(b) of the OBBBA added the deduction provided by section 224 to the list of deductions used to determine taxable income in section 63(b). Specifically, section 224(a) provides for a deduction in an amount equal to the qualified tips received by an individual in a taxable year that are included on statements \2\ furnished to the individual pursuant to section 6041(d)(3), section 6041A(e)(3), section 6050W(f)(2), or section 6051(a)(18), or are reported by the taxpayer on Form 4137 (or successor). Section 224(b)(1) limits this deduction to an amount not to exceed $25,000 in a taxable year. Section 224(b)(2) further limits the amount of the deduction based on a taxpayer's modified adjusted gross income, which is a taxpayer's adjusted gross income for the taxable year increased by any amount excluded from gross income under section 911, section 931, or section 933. The deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers). --------------------------------------------------------------------------- \2\ The House Budget Committee report on the OBBBA, H. Rept. 119-106, at 1503 (2025), specifies that the qualified tip amounts included on reporting statements (for example, Form 1099) must be separately accounted for on the statements. --------------------------------------------------------------------------- Section 224(c) provides that, in the case of qualified tips received by an individual during any taxable year in the course of a trade or business (other than the trade or business of performing services as an employee) of such individual, such qualified tips are taken into account under section 224(a) only to the extent that the gross income for the taxpayer from such trade or business for such taxable year (including such qualified tips) exceeds the sum of the deductions allocable to the trade or business in which such qualified tips are received by the individual for such taxable year. Section 224(d)(1) defines ``qualified tips'' as cash tips received by an individual in an occupation that customarily and regularly received tips on or before December 31, 2024, as provided by the Secretary. Section 224(d)(2) further requires that qualified tips not include any amount received by an individual unless the amount:Is paid voluntarily without any consequence in the event of nonpayment, is not the subject of negotiation, and is determined by the payor; Is not received in the course of a trade or business that is a specified service trade or business as defined in section 199A(d)(2) of the Code; and Satisfies such other requirements as may be established by the Secretary in regulations or other guidance. Section 224(d)(2) further provides that, for purposes of determining whether amounts received in the course of a trade or business is a specified trade or business as defined in section 199A(d)(2), in the case of an individual receiving tips in the trade or business of performing services as an employee, such individual is treated as receiving tips in the course of a trade or business which is a specified service trade or business if the trade or business of the employer is a specified service trade or business. Section 224(d)(3) provides that for purposes of section 224(d)(1), the term ``cash tips'' includes tips received from [[Page 45342]] customers that are paid in cash or charged and, in the case of an employee, tips received under any tip-sharing arrangement. Section 224(e) provides that no deduction is allowed under section 224 unless the taxpayer includes on the return of tax for the taxable year such individual's Social Security number (SSN) as defined in section 24(h)(7) of the Code. Section 224(f) provides that if the taxpayer is a married individual (within the meaning of section 7703), section 224 applies only if the taxpayer and the taxpayer's spouse file a joint return for the taxable year. That is, the deduction is not available for a taxpayer who is married and files separately. Section 224(h) provides that no deduction is allowed under section 224 for any taxable year beginning after December 31, 2028. Section 70201(h) of the OBBBA instructs the Secretary to publish a list of occupations that customarily and regularly received tips on or before December 31, 2024, for purposes of section 224(d)(1) no later than 90 days after the date the OBBBA was enacted (July 4, 2025). The Council of Economic Advisors (CEA) released a report in June 2025, entitled ``The One Big Beautifull Bill: Legislation for Historic Prosperity and Deficit Reduction,'' that estimates the economic effects and fiscal impacts of OBBBA. In this report CEA estimates that the no tax on tips provision of OBBBA will increase average take-home pay for tipped workers by $1,300 per year. CEA also estimates that the provisions for no tax on overtime, no tax on tips, and senior tax relief will boost Gross Domestic Product by 0.3 to 0.4 percent while they are in effect and the growth that they generate will yield $54 to $73 billion in higher revenue to offset the direct revenue losses attributable to these provisions. Explanation of Provisions 1. Qualified Tips Section 224(d)(1) defines ``qualified tips'' as cash tips received by an individual in an occupation that customarily and regularly received tips on or before December 31, 2024, as provided by the Secretary. Consistent with section 224(d), the proposed regulations would define ``qualified tips'' as amounts received as cash tips by an individual in an occupation that customarily and regularly received tips on or before December 31, 2024, subject to certain limitations. The proposed regulations would define cash tips as tips received from customers or, in the case of an employee, through a mandatory or voluntary tip-sharing arrangement, such as a tip pool, that are paid in a cash medium of exchange, including by cash, check, credit card, debit card, gift card, tangible or intangible tokens that are readily exchangeable for a fixed amount in cash (such as casino chips), and any other form of electronic settlement or mobile payment application that is denominated in cash. Cash tips would not include items paid in any medium other than cash or charge, such as event tickets, meals, services, or other assets that are not exchangeable for a fixed amount in cash (such as most digital assets). For purposes of these proposed regulations, tips would be amounts paid by customers for services that are in excess of the amount agreed to, required, charged, or otherwise reasonably expected to have to be paid for the services in an arm's length transaction. These definitions are consistent with IRS guidance defining tips for FICA and income tax withholding purposes in Sec. Sec. 31.3121(a)(12)-1 and 31.3401(a)(16)-1, as well as other IRS guidance concerning tips in Notice 2023-13, 2023-9 I.R.B. 534, and Rev. Rul. 2012-18, 2012-26 I.R.B. 1032. A. Payments Must Be Voluntary Section 224(d)(2)(A) provides that ``qualified tips'' must be paid voluntarily without any consequence in the event of nonpayment, must not be the subject of negotiation, and must be determined by the payor. In Revenue Ruling 2012-18, the IRS applied similar factors in distinguishing tips from non-tip wages, specifically service charges, for FICA and income tax withholding purposes. Revenue Ruling 2012-18 provides that the absence of any of the following factors creates a doubt as to whether a payment is a tip and indicates that the payment may be a service charge: (1) the payment must be made free from compulsion, (2) the customer must have the unrestricted right to determine the amount, (3) the payment should not be the subject of negotiation or dictated by employer policy, and (4) generally, the customer has the right to determine who receives the payment. See also Ann. 2012-25, 2012-26 I.R.B. 1058; Rev. Rul. 59-252, 1059-2 C.B. 215. Example A in Revenue Ruling 2012-18 concludes that an 18% charge automatically added to a bill for a large party is a service charge and not a tip because it was dictated by the employer and was not paid free from compulsion. Consistent with both existing IRS guidance on tips and evolving practices concerning service charges, the proposed regulations would clarify that service charges, automatic gratuities, and other mandatory amounts automatically added to a customer's bill by the vendor or establishment, are not qualified tips for purposes of section 224(d) unless the customer is expressly provided an option to disregard or modify it without consequence. B. Special Rules Regarding a Specified Service Trade or Business Section 224(d)(2)(B) provides that qualified tips do not include those received in the course of a trade or business that is a specified service trade or business (SSTB) as defined in section 199A(d)(2). Under section 199A(d)(2), an SSTB is defined as any trade or business (A) involving the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, or any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners, or (B) that involves the performance of services that consist of investing and investment management, trading, or dealing in securities (as defined in section 475(c)(2)), partnership interests, or commodities (as defined in section 475(e)(2)).\3\ Treasury regulations in Sec. 1.199A-5(b)(2) further define what it means to perform services in the fields listed in section 199A(d)(2)(A). For example, Sec. 1.199A-5(b)(2)(vi) provides, in part, that the meaning of services performed in the performing arts means ``the performance of services by individuals who participate in the creation of performing arts, such as actors, singers, musicians, entertainers, directors, and similar professionals performing services in their capacity as such.'' The regulations further provide that, `[t]he performance of services in the field of performing arts does not include the provision of services that do not require skills unique to the creation of performing arts, such as the maintenance and operation of equipment or facilities for use in the performing arts. . . . [or the] provision of services by persons who broadcast or otherwise disseminate video or audio of performing arts to the public.'' The proposed regulations would provide that an amount received by an individual in the course of an SSTB (as defined in section 199A(d)(2) and Sec. 1.199A-5(b)) is not a qualified tip. The Treasury Department and the IRS [[Page 45343]] request comments on the application of the existing rules under Sec. 1.199A-5(b) to the SSTB definition in section 224. Specifically, comments are requested concerning whether the definitions in Sec. 1.199A-5(b) should be refined for section 224 purposes. --------------------------------------------------------------------------- \3\ Section 199A(d)(2) cross references the qualified trade or business definition in section 1202(e)(3)(A), with certain modifications. --------------------------------------------------------------------------- Consistent with the flush language in section 224(d)(2), the proposed regulations would also provide that tips received by an employee performing services for the employee's employer in the course of a specified service trade or business operated by the employer are not qualified tips. The proposed regulations would clarify that this rule applies without regard to whether an owner of the trade or business is able to claim a section 199A deduction. For example, this rule applies if the employer is a corporation, even though corporations are not eligible for the deduction under section 199A. The proposed regulations would also clarify that this rule applies even if the employee receiving tips in the course of working for an SSTB employer is working in an occupation that customarily and regularly received tips on or before December 31, 2024, for purposes of section 224(d)(1) and is listed in proposed Sec. 1.224-1(f). The proposed regulations would provide examples illustrating this rule. C. Determining Qualified Tips for Employees Who Participate in Voluntary Tip Reporting Programs With Tip Rates Employees who enter into a Tipped Employee Participation Agreement as part of the Tip Rate Determination Agreement (TRDA) program or a Model Gaming Employee Tip Reporting Agreement as part of the Gaming Industry Tip Compliance Agreement (GITCA) program agree to report tips to their employer at or above the tip rate established by their employer for their occupational category. In exchange for the employees' voluntary agreement to report tips at this agreed upon rate, the IRS provides tip examination protection to the employees for the taxable years in which their agreements were in effect. The proposed regulations would clarify that ``qualified tips'' include tips reported pursuant to an agreement under the TRDA or GITCA program provided that the participating employee in the TRDA or GITCA program is otherwise eligible for the deduction under section 224, and reports tips using the tip rates established under their agreement. Additionally, the proposed regulations would clarify that an employee participating in the TRDA or GITCA program may report additional qualified tips to the IRS on the Form 4137. D. Other Requirements Section 224(d)(2) provides that the term ``qualified tips'' does not include amounts received by an individual unless such other requirements as may be established by the Secretary in regulations or other guidance are satisfied. The proposed regulations would provide that amounts received for services the performance of which is a felony or misdemeanor under applicable law are not qualified tips. In addition, the proposed regulations would provide that amounts received for prostitution services and pornographic activity are not qualified tips. Finally, to prevent reclassification of income as qualified tips, and to prevent abuse of the deduction, the proposed regulations would also provide that a payment is not a qualified tip if the tip recipient has an ownership interest in or is employed by the payor of the tip. 2. Trade or Business Limitations Section 224(c) imposes a limitation on a taxpayer who receives tips in the course of a trade or business (other than the trade or business of performing services as an employee). The proposed regulations would restate the statutory limit, which is the difference between the gross income from the taxpayer's trade or business for the taxable year minus the sum of deductions (other than the deduction for qualified tips) for that trade or business for the taxable year. The proposed regulations would clarify that the deduction allowed for qualified tips is not taken into account for this purpose because it is not a deduction associated with a trade or business. 3. Social Security Numbers and Married Individuals The proposed regulations would clarify that a taxpayer must include on the tax return for the taxable year the SSN, within the meaning of section 24(h)(7), of the individual who has received the tips. The proposed regulations would also restate the statutory requirement that a taxpayer who is married, within the meaning of section 7703, must file a joint return with the taxpayer's spouse to claim the deduction allowed by section 224. The proposed regulations would further clarify that married taxpayers are only required to include the SSN of the taxpayer who has received the qualified tips to claim the deduction, and that an SSN is required of both taxpayers only when both have qualified tips for which they are claiming a deduction. The proposed regulations would also clarify that the total amount of qualified tips that can be deducted on a return per calendar year is $25,000 regardless of filing status. After applying the $25,000 limitation, the proposed regulations would provide that the amount is subject to the phase-out based on the taxpayers' modified adjusted gross income described in section 224(b)(2). 4. Occupations That Customarily and Regularly Received Tips on or Before December 31, 2024 Under section 224(d)(1), ``qualified tips'' are ``cash tips received by an individual in an occupation that customarily and regularly received tips on or before December 31, 2024, as provided by the Secretary.'' In addition, section 70201(h) of the OBBBA instructs the Secretary to publish a list of occupations that customarily and regularly received tips on or before December 31, 2024, for purposes of section 224(d)(1). A. Methodology The Treasury Department and the IRS drafted the proposed list of occupations that customarily and regularly received tips based on a review of IRS data, legislative history, and survey data regarding tipped occupations and the presence of certain factors demonstrating that those occupations customarily and regularly received tips. Because the Code does not define the phrase ``customarily and regularly'' regarding tips,\4\ the Treasury Department and the IRS looked to dictionary definitions and other statutory provisions for guidance. The [[Page 45344]] Oxford English dictionary defines the term ``customarily'' as ``[i]n a way that follows customs or usual practices; according to custom; usually; habitually.'' \5\ It defines ``regularly'' as ``in conformity to a general rule or established principle; in a steady, predictable, or uniform manner; at fixed times or uniform intervals; repeatedly, without interruption; frequently, often.'' \6\ --------------------------------------------------------------------------- \4\ The Code does use the term ``customarily'' in section 6053(c)(3). Section 6053(c)(3) requires large food or beverage establishments to allocate tips among ``employees performing services during any payroll period who customarily receive tip income.'' Section 6053(c)(4) defines the term ``large food or beverage establishment'' as a trade or business ``with respect to which the tipping of employees serving food or beverages by customers is customary.'' Regulations under section 6053(c) provide further guidance concerning the term ``customary.'' Section 31.6053- 3(j)(6) excludes ``fast food'' operation from the definition of ``food or beverage operation.'' Section 31.6053-3(j)(7) provides that, for purposes of defining ``large food or beverage establishments,'' tipping would not be considered customary for a cafeteria style operation or for a food or beverage operation where at least 95% of its total sales are nonallocable receipts (defined as carryout sales and sales with service charges). A ``cafeteria style operation'' is defined in Sec. 31.6053-3(j)(18) as a food or beverage operation which is primarily self-service and in which the total cost of food or beverages selected by a customer is paid prior to the customer's being seated or is stated on a check provided to the customer prior to the customer's being seated and is paid by the customer to a cashier. \5\ Oxford University Press. (n.d.). Customarily, adv. In Oxford English dictionary. Retrieved July 31, 2025, from https://doi.org/10.1093/OED/1071895970. \6\ Oxford University Press. (n.d.). Regularly, adv., 1.a. In Oxford English dictionary. Retrieved July 31, 2025, from https://doi.org/10.1093/OED/1195323874. --------------------------------------------------------------------------- The Fair Labor Standards Act (FLSA) uses the phrase ``customarily and regularly'' in relation to the FLSA tip credit.\7\ The FLSA defines a ``tipped employee'' for whom an employer may take a tip credit as ``any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.'' 29 U.S.C. 203(t). The FLSA further provides that when an employer takes an FLSA tip credit for a tipped employee, the tipped employee must retain all of the tips the employee receives, except that this requirement ``shall not be construed to prohibit the pooling of tips among employees who customarily and regularly receive tips.'' 29 U.S.C. 203(m)(2)(A).\8\ United States Department of Labor (DOL) regulations provide, in part, that ``[t]he phrase `customarily and regularly' signifies a frequency which must be greater than occasional, but which may be less than constant.'' 29. CFR 531.57.\9\ DOL guidance also addresses specific occupations in which employees customarily and regularly receive tips within the meaning of the FLSA. For instance, DOL guidance interpreting the FLSA states that servers, counter personnel who serve customers, bellhops, bussers (that is, server helpers), and service bartenders are examples of occupations that ``customarily and regularly receive tips'' for purposes of the FLSA.\10\ In guidance, and in opinion letters based on specific factual scenarios presented, DOL's Wage and Hour Division (WHD) has looked to the FLSA's statutory text, its legislative history, and the extent to which employees in the occupation interact with customers to determine whether an employee customarily and regularly receives tips for purposes of the FLSA. Courts similarly have considered whether an employee is in an occupation that customarily and regularly receives tips for purposes of the FLSA.\11\ Based on these definitions and the guidance under the FLSA, the Treasury Department and the IRS determined that individuals must have received cash tips more often than occasionally (for example, not only on annual holidays or other celebrations) during a calendar year ending on or before December 31, 2024, in order for the occupation to be an occupation that customarily and regularly received tips on or before December 31, 2024. --------------------------------------------------------------------------- \7\ Under the FLSA, employers take a tip credit of up to $5.12 per hour to bring an employee's total earnings up to the Federal minimum wage amount. See 29 U.S.C. 203(m)(2)(A)(i)-(ii); see also Fair Labor Standards Amendments of 1989, Public Law 101-157, 5, 103 Stat. 938, 941 (1989) (requiring employers to pay directly at least ``50 percent of the [$4.25 per hour] minimum wage rate after March 31,1991''). \8\ The FLSA's tip credit has several components, including that an employee must be in an occupation in which the employee customarily and regularly receives at least a certain amount per month in tips (more than $30), retains all tips (except for a pool limited to employees who customarily and regularly receive tips), receives other direct wages, and receives advance notice to qualify as a ``tipped employee'' for whom an employer may take a tip credit against its minimum wage obligations. See 29 U.S.C. 203(m)(2)(A), (t). \9\ The regulations also provide that ``if an employee is in an occupation in which he normally and recurrently receives more than $30 a month in tips, he will be considered a tipped employee even though occasionally because of sickness, vacation, seasonal fluctuations or the like, he fails to receive more than $30 in tips in a particular month.'' 29 CFR 531.57. \10\ See DOL Field Operation Handbook, Sec. 30d08. Retrieved August 19, 2025, from https://www.dol.gov/agencies/whd/field-operations-handbook; see also WHD Opinion Letter FLSA2009-12 (Jan. 15, 2009); WHD Opinion Letter FLSA2008-18 (Dec. 19, 2008); and WHD Opinion Letter FLSA-858 (June 28, 1985) (concluding that barbacks, itamae-sushi and teppanyaki chefs, and a ``wine-server/captain- host,'' respectively, could be included in a tip pool with tipped employees for whom the employer took a tip credit). \11\ See, e.g., Wai Man Tom v. Hosp. Ventures LLC, 980 F.3d 1027, 1040 (4th Cir. 2020); Montano v. Montrose Rest. Assocs., Inc., 800 F.3d 186, 191 (5th Cir. 2015) (finding that ``[t]he common thread of the cases and the DOL opinion letters is to require a tipped employee to have more than a de minimis interaction with the customers who leave the undesignated tips'' for purposes of the FLSA tip credit.); Myers v. Copper Cellar Corp., 192 F.3d 546, 550-51 (6th Cir. 1999); Kilgore v. Outback Steakhouse of Fla., Inc., 160 F.3d 294, 301 (6th Cir. 1998) (noting that restaurant hosts ``sufficiently interact with customers in an industry where undesignated tips are common.''). --------------------------------------------------------------------------- With these parameters in mind, the Treasury Department and the IRS reviewed data collected from 2023 Forms W-2, Wage and Tax Statement,\12\ and Forms 4137, Social Security and Medicare Tax on Unreported Tip Income, and corresponding income tax returns (Forms 1040) that reported tips in box 7 of Form W-2 (Social Security tips) or on Line 4 of an attached Form 4137. The Treasury Department and the IRS identified occupations listed on income tax returns (as reported on page 2 of Form 1040 next to the taxpayer's signature) as having customarily and regularly received tips, based on the percentage of wage earners who reported a given occupation in the tax return data and also reported at least $100 in annual tipped income. --------------------------------------------------------------------------- \12\ Section 224(d)(1) specifies that the occupation must have customarily and regularly received tips on or before December 31, 2024. The Treasury Department and the IRS reviewed data for the 2023 tax year because that was the most recent year for which comprehensive income tax return data was available. The Treasury Department and the IRS compared the 2023 tax year data to similar data for 2017-2022. Because 2023 data was similar to prior year data, the Treasury Department and the IRS have reviewed preliminary data for the 2024 tax year and anticipate that final 2024 data will be substantially similar to 2023 data. --------------------------------------------------------------------------- The Treasury Department and the IRS next determined that the data was subject to limitations that resulted in under-inclusion because the data was limited to the tax return data of individuals who reported tips to employers and received a Form W-2 or who filed Form 4137. Individuals working in certain occupations, such as rideshare drivers, receive tips but may operate as independent contractors rather than employees, and therefore do not receive a Form W-2 reporting tips, nor do they separately report their tip income for income tax purposes.\13\ Because tips were not separately reported on Forms 1099-NEC, Nonemployee Compensation, 1099-MISC, Miscellaneous Information, or 1099-K, Payment Card and Third Party Network Transactions, certain occupations that received tips were not reflected in the income tax return data. In addition, the Treasury Department and IRS determined that the data may have been overinclusive due to variations in how taxpayers chose to write their occupation on Form 1040. For example, the self-reported occupation may have typographical errors or abbreviations, or taxpayers may have written multiple occupations on their Form 1040, separated by a comma or a slash mark (like ``Occupation 1/Occupation 2'').\14\ These [[Page 45345]] variations in how taxpayers reported their occupation on Form 1040 made it difficult for the data analysis to capture all taxpayers with a given occupation (in the sense of what job they actually performed, rather than what they wrote on the Form 1040) together. This was particularly problematic for certain occupations that had more variations in how they were reported (for example, server, waitstaff, waitress, waiter). --------------------------------------------------------------------------- \13\ While tip income must be included in the total income that independent contractors report on their income tax returns, independent contractors did not separately report tips on their income tax returns and payors did not separately report tips to payees on Forms 1099. \14\ Taxpayers have a single line to report their occupation on the Form 1040. The 1040 instructions do not address how to report multiple occupations. Some taxpayers reported more than one occupation. Additionally, some taxpayers with multiple jobs only reported one occupation. When analyzing the tax return data, it was sometimes difficult to determine which occupation resulted in the receipt of tips. Therefore, the Treasury Department and the IRS limited the main analysis of the tax return data to taxpayers with only one job by limiting the data to taxpayers who submitted one Form W-2 with their Form 1040, did not file a Schedule C or Schedule F, and reported no active income from a partnership or S corporation on Schedule E. --------------------------------------------------------------------------- To account for these limitations, the Treasury Department and the IRS examined occupations identified in the GITCA program, a voluntary tip reporting program for the gaming industry run by the IRS, and other similar IRS tip reporting programs as occupations that received tips on or before December 31, 2024. See Rev. Proc. 2007-32, 2007-22 I.R.B. 1322.\15\ The IRS has been collecting tip data through its GITCA program (and other voluntary tip reporting programs) for over 20 years. The GITCA program requires participating employers to provide annual reports to the IRS that contain information regarding employees' occupational categories, shifts, and outlets; gross receipts subject to food and beverage tipping; and aggregated receipts showing charged tips and reported tips. The occupations identified as having customarily and regularly received tips based on the GITCA data were largely consistent with those identified by the confidential tax return data. --------------------------------------------------------------------------- \15\ The GITCA program was established by Rev. Proc. 2003-35, 2003-20 I.R.B. 919, and was updated by Rev. Proc. 2007-32 with a new model GITCA. Revenue Procedure 2020-47, 2020-48 I.R.B. 1121 modified Rev. Proc. 2007-32 to provide that the term of a GITCA is generally five years. --------------------------------------------------------------------------- The Treasury Department and the IRS also consulted the House Budget Committee report on the OBBBA, H. Rept. 119-106, at 1502 (2025), for additional information regarding occupations that traditionally and customarily received tips on or before December 31, 2024. In the explanation of the deduction for qualified tips under section 224, the report describes occupations that traditionally and customarily received tips on or before December 31, 2024, as including, but not limited to, restaurant servers, bartenders, taxi drivers, rideshare drivers, food delivery drivers, hairdressers, hairstylists, hotel bellhops, hotel housekeepers, and casino dealers.\16\ To the extent those occupations were not already captured by the IRS data, they were added to the list. --------------------------------------------------------------------------- \16\ Initial drafts of the OBBBA legislation contemplated a deduction for tips received by individuals in occupations that traditionally and customarily received tips, but this language was later revised to refer to occupations that customarily and regularly received tips. --------------------------------------------------------------------------- Finally, the Treasury Department and the IRS examined survey data from the Panel Study of Income Dynamics that included information on occupations and tip income of both employees and self-employed individuals. The Panel Study of Income Dynamics is a nationally representative survey conducted by the University of Michigan. It includes questions about the occupation of, and tip income received by, the reference person and the person's spouse (if they are married). The Treasury Department and the IRS consulted data from surveys conducted in years 2017, 2019, and 2023 (surveys which inquired about tips received in 2016, 2018, and 2022, respectively), which is the most recent data available (except for 2021, which was avoided due to any potential abnormalities related to the COVID-19 pandemic). The occupations identified as having customarily and regularly received tips based on this survey data were largely consistent with those identified by the confidential tax return data. While reviewing the data, the Treasury Department and the IRS recognized that the occupations identified as having customarily and regularly received tips on or before December 31, 2024, were in service industries, and the individuals working in the occupations either interacted with the customers for whom they were providing a service or, commonly participated in tip-sharing arrangements with individuals who interacted with customers. In defining ``cash tips,'' section 224(d)(3) ``includes tips received from customers . . ., and, in the case of an employee, tips received under any tip-sharing arrangement.'' The Treasury Department and the IRS considered the language in section 224(d)(3) to indicate that, for purposes of the deduction for qualified tips under section 224, there is no distinction between employees in occupations receiving tips directly from customers and employees in occupations receiving tips through tip-sharing arrangements with other employees that interact with customers. While certain employees in tip-sharing arrangements may not have extensive, or any, customer interaction, they do assist employees who do interact with customers or otherwise contribute to the overall customer experience. For this reason, the Treasury Department and the IRS have proposed that certain occupations that may not involve direct interactions with customers should still be considered occupations that customarily and regularly received tips if employees in such occupations participated in tip-sharing arrangements such as tip pooling or tip-outs with employees who do interact with customers. For example, dishwashers reported receiving sufficient tips to appear in the IRS data and, even though they do not typically interact with customers, they may sometimes participate in tip-sharing arrangements with employees who do interact with customers (for example, waitstaff). Accordingly, dishwashers are included in the proposed list of occupations that customarily and regularly received tips for purposes of section 224. The Treasury Department and the IRS recognize that courts and DOL have interpreted the FLSA standard for customarily and regularly somewhat differently, but this interpretation is due to differences in the specific language, purpose, and history of the FLSA tip credit and mandatory tip-sharing arrangement provisions. For instance, the FLSA provides that when an employer takes a tip credit, the employer may only require ``the pooling of tips among employees who customarily and regularly receive tips.'' 29 U.S.C. 203(m)(2)(A). This presumes that the employee has some level of interaction with customers to ``customarily and regularly'' receive tips under the FLSA.\17\ In contrast, section 224(d)(3) specifically defines ``cash tips'' to include both tips received from customers and, in the case of an employee, tips received under any tip-sharing arrangement. --------------------------------------------------------------------------- \17\ See Montano v. Montrose Rest. Assocs., Inc., 800 F.3d 186, 189 (5th Cir. 2015) (noting that ``[i]t would be circular'' to interpret the FLSA to mean that if an employer requires a tipped employee to give another employee tips, that employee customarily and regularly receives tips for purposes of 29 U.S.C. 203(m)(2)(A)'s tip pooling limitation). --------------------------------------------------------------------------- After compiling the list of occupations that customarily and regularly received tips, the Treasury Department and the IRS compared the proposed list of occupations that customarily and regularly received tips for purposes of section 224 to occupations contained in the 2018 Standard Occupation Classification (SOC) code. The SOC Code system is published by the Executive Office of the President, Office of Management and Budget (OMB). The SOC Code system is a Federal statistical standard used by Federal agencies to classify workers into [[Page 45346]] occupational categories for the purpose of collecting, calculating, or disseminating data.\18\ The SOC Code system classifies paid work or work for profit into occupational categories based on the work performed. All workers are classified into one of 867 detailed occupations according to their occupational definition.\19\ To facilitate classification, detailed occupations are combined to form 459 broad occupations, 98 minor groups, and 23 major groups.\20\ Detailed occupations in the SOC with similar job duties, and in some cases skills, education, and/or training, are grouped together. The Treasury Department and the IRS focused on the detailed occupations in the SOC Code system. However, in the process of compiling this list, the Treasury Department and the IRS determined that several of the detailed SOC codes included, in the same detailed SOC code, some occupations that customarily and regularly received tips on or before December 31, 2024, and other occupations that did not.\21\ --------------------------------------------------------------------------- \18\ Office of Management and Budget. (2018). Standard Occupational Classification Manual. U.S. Government Publishing Office. This manual and other related SOC documents can be found at https://www.bls.gov/soc. \19\ Id. \20\ Id. \21\ For instance, the SOC Code for ``Animal Caretakers,'' is described in the 2018 SOC Code System as an occupation in which individuals ``provide care to promote and maintain the well-being of pets and other animals that are not raised for consumption.'' More specific occupations that would fall under this description include both pet caretakers and zookeepers. Pet caretakers customarily and regularly receive tips. Zookeepers, on the other hand, do not. Thus, if the ``Animal Caretakers'' SOC code were included in the list of occupations that customarily and regularly receive tips, then zookeepers would become part of the list via their corresponding SOC code, even though they do not customarily and regularly receive tips. --------------------------------------------------------------------------- To address the issue of the over-inclusivity of certain SOC codes, the Treasury Department and the IRS created a new categorization system. The descriptions and illustrative examples for the occupation codes in this new system often mirror their SOC code counterparts. However, in situations where the SOC code was overly inclusive, the new system provides an occupation code, description, and illustrative examples that only encompass occupations that customarily and regularly received tips on or before December 31, 2024. In addition, in certain situations where multiple detailed SOC codes described occupations that had similar titles, the new system provides an occupation code, description, and illustrative examples that stem from multiple detailed SOC codes. For example, detailed SOC codes for a variety of chefs and cooks were aggregated in the new system into a single occupation code. Lastly, in certain situations, some detailed SOC codes were split into multiple occupation codes under the new system. For example, chauffeurs were moved from the SOC occupation ``Shuttle Drivers and Chauffeurs'' to the ``Taxi Driver'' occupation, thus creating under the new system two occupations: ``Taxi and Rideshare Drivers and Chauffeurs'' and ``Shuttle Drivers.'' B. List of Occupations That Customarily and Regularly Received Tips On or Before December 31, 2024 The proposed regulations would include the list of occupations that customarily and regularly received tips on or before December 31, 2024 (List of Occupations that Receive Tips), that was compiled based on the methodology described in this preamble. In accordance with statutory language in section 224(d)(1), the proposed regulations would provide that only occupations included in the List of Occupations that Receive Tips are eligible for the deduction in section 224(a). This List of Occupations that Receive Tips would be organized according to the new categorization system created by the Treasury Department and the IRS specifically for this purpose, as described in this preamble. The specific occupations in the List of Occupations that Receive Tips, each assigned a three-digit code called a ``Treasury Tipped Occupation Code'' or ``TTOC'' would be grouped together in the following more general occupational categories: 100s--Beverage and Food Service 200s--Entertainment and Events 300s--Hospitality and Guest Services 400s--Home Services 500s--Personal Services 600s--Personal Appearance and Wellness 700s--Recreation and Instruction 800s--Transportation and Delivery The List of Occupations that Receive Tips also provides the ``TTOC Occupation Title'' for each occupation code, a short description of the types of services performed by individuals working in an occupation included in this occupation code, illustrative examples of specific occupations that would be included under the occupation code, and the related SOC System Code(s). Proposed Applicability Dates These regulations are proposed to apply for taxable years beginning after December 31, 2024. Taxpayers may rely on these proposed regulations for taxable years beginning after December 31, 2024, and on or before the date these regulations are published as final regulations in the Federal Register, provided that taxpayers follow these proposed regulations in their entirety and in a consistent manner. Special Analyses I. Regulatory Planning and Review--Economic Analysis Executive Orders 12866 and 13563 direct agencies to assess costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. The proposed regulations have been designated by the OMB's Office of Information and Regulatory Affairs (OIRA) as subject to review under Executive Order 12866 pursuant to the Memorandum of Agreement (MOA, July 4, 2025) between the Treasury Department and the Office of Management and Budget regarding review of tax regulations. OIRA has determined that the proposed rulemaking is economically significant under section 3(f)(1) of Executive Order 12866 and subject to review under Executive Order 12866 and section 1(c) of the Memorandum of Agreement. Accordingly, the proposed regulations have been reviewed by OMB. Need for Regulation Section 70201 of Public Law 119-21, 139 Stat. 72 (July 4, 2025), commonly known as the One, Big, Beautiful Bill Act (OBBBA), adds new section 224 to the Internal Revenue Code,\22\ which provides an income tax deduction for ``qualified tips'' that are reported on Internal Revenue Service (IRS) returns and various forms. The statute requires, under section 70201(h) of the OBBBA, that not later than 90 days after the date of enactment of OBBBA, the Secretary of the Treasury or the Secretary's delegate (Secretary) publish a list of occupations that customarily and regularly received tips on or before December 31, 2024, for purposes of defining the term ``qualified tips'' under section 224(d)(1). --------------------------------------------------------------------------- \22\ References to a ``section'' are to a section of the Internal Revenue Code of 1986, as amended (Code), unless otherwise indicated. --------------------------------------------------------------------------- [[Page 45347]] The proposed regulations clarify the definition of ``qualified tips'' for purposes of the income tax deduction under section 224. As required by section 70201(h) of the OBBBA, the proposed regulations also provide the list of occupations that customarily and regularly received tips on or before December 31, 2024 (List of Occupations that Receive Tips). The purpose of these proposed regulations is to provide guidance on requirements of section 224 to claim the deduction, including the definition of ``cash tips;'' determinations of whether the tips received were in the course of a trade or business which is a specified service trade or business; the requirement for the taxpayer to include on the tax return for the taxable year such individual's Social Security number (SSN); and the requirement that if the taxpayer is married (within the meaning of section 7703), section 224 applies only if the taxpayer and the taxpayer's spouse file a joint return for the taxable year. The proposed regulations also clarify that the deduction is limited to $25,000, regardless of the taxpayer's filing status, and that the deduction is reduced based on the taxpayer's modified adjusted gross income for that taxable year after applying the $25,000 limitation. I. The Statute and Proposed Regulations For taxable years beginning after December 31, 2024, and before January 1, 2029, employees and self-employed individuals may deduct qualified tips from their gross income when calculating their Federal income tax liability. Section 224(d)(1) defines the term ``qualified tips'' to mean cash tips received by an individual in an occupation that customarily and regularly received tips on or before December 31, 2024, as provided by the Secretary. Section 224(d)(3) defines the term ``cash tips'' for the purposes of section 224(d)(1) to include tips received from customers that are paid in cash or charged and, in the case of an employee, tips received under any tip-sharing arrangement. The proposed regulations clarify that ``cash tips'' are amounts received from customers or, in the case of an employee, through a mandatory or voluntary tip-sharing arrangement that are paid in a cash medium of exchange, including by check, credit card, debit card, gift card, tangible or intangible tokens that are readily exchangeable for a fixed amount in cash (such as casino chips), and any other form of electronic settlement or mobile payment application that is denominated in cash. Cash tips do not include items paid in any medium other than cash or charge, such as event tickets, meals, services, or other assets that are not exchangeable for a fixed amount in cash (such as most digital assets). Section 224(a) allows qualified tips to be deducted if they are included on Form W-2, ``Wage and Tax Statement;'' Form 1099-NEC, ``Nonemployee Compensation;'' Form 1099-K, ``Payment Card and Third Party Network Transactions;'' Form 1099-MISC, ``Miscellaneous Information;'' or Form 4137, ``Social Security and Medicare Tax on Unreported Tip Income.'' Employees that enter a Tipped Employee Participation Agreement as part of the IRS Tip Rate Determination Agreement (TRDA) program or a Model Gaming Employee Tip Reporting Agreement as part of the IRS Gaming Industry Tip Compliance Agreement (GITCA) program report their tips according to tip rates established under their agreement (and these tips are included on Form W-2). The proposed regulations would clarify that the term ``qualified tips'' for employees participating in the TRDA or GITCA program includes tips reported using the tip rates established under their agreement and additional tips reported on Form 4137. The proposed regulations clarify that the section 224(d)(2)(A) term ``qualified tips'' only includes amounts that are paid voluntarily without any consequence in the event of nonpayment, are not the subject of negotiation, and are determined by the payor. The proposed regulations clarify that the section 224(d)(2)(B) term ``qualified tips'' excludes tips received by an individual who is self-employed in a specified service trade or business (SSTB) as defined in section 199A(d)(2) or by an employee performing services for the employee's employer in the course of an SSTB operated by the employer. The proposed regulations also clarify that the term ``qualified tips'' does not include tips that were received while performing a service that is a felony or misdemeanor under applicable law. (However, ``qualified tips'' may include tips received for a service that is legal but while working for an establishment that violates applicable law in other respects.) In addition, the proposed regulations provide that amounts received for prostitution services and pornographic activity are not included in the definition of ``qualified tips.'' The proposed regulations also clarify that a payment is not considered a ``qualified tip'' if the tip recipient has an ownership interest in or is employed by the payor of the tip. Section 224(c) limits the deduction for qualified tips received by a self-employed individual to the gross income (including the qualified tips) from the individual's trade or business minus the sum of the individual's deductions (other than the deduction for qualified tips) that are allocable to that trade or business. The proposed regulations clarify that the deduction for qualified tips is not included when calculating this limit because it is not a trade or business deduction. The proposed regulations clarify the requirement in section 224(e) that taxpayers must include their SSN (as defined in section 24(h)(7)) on their tax return to claim the deduction for qualified tips. Taxpayers with an Individual Taxpayer Identification Number (ITIN) rather than an SSN will not be able to use their tips to claim the deduction under section 224. Married taxpayers must include the SSN of the taxpayer who earned the qualified tips that are being used to claim the deduction; if both spouses earned qualified tips for the deduction, then they must include the SSNs of both spouses on their tax return. The proposed regulations clarify section 224(f), which requires married individuals (within the meaning of section 7703) to file a joint tax return for the taxable year to claim the deduction for qualified tips. Section 224(b)(1) limits the deduction for qualified tips for any taxable year to $25,000. The proposed regulations clarify that this limitation applies regardless of the taxpayer's filing status for that taxable year. Under section 224(b)(2)(A), the deduction for qualified tips is reduced (but not below zero) by $100 for each $1,000 by which the taxpayer's modified adjusted gross income (MAGI) exceeds $150,000 ($300,000 in the case of a joint return). Section 224(b)(2)(B) defines ``modified adjusted gross income'' for the purposes of this phaseout as adjusted gross income of the taxpayer for the taxable year plus any amount excluded from gross income under section 911, section 931, or section 933. The proposed regulations clarify that the phaseout based on MAGI is applied after applying the $25,000 limit to the deduction. The proposed regulations implement the statutory requirement from section 70201(h) of the OBBBA that the Secretary publish a list of occupations that customarily and regularly received tips on or before December 31, 2024. For each occupation, the list provides a numeric Treasury Tipped Occupation Code (TTOC), an occupation title, a description of the types of services performed by individuals working in [[Page 45348]] the occupation, illustrative examples of specific occupations that would be included, and the Standard Occupation Classification (SOC) system code(s) that are related to the occupation. II. Baseline The Treasury Department and the IRS have assessed the benefits and costs of the proposed regulations relative to a no-action baseline reflecting anticipated Federal income tax-related behavior in the absence of these proposed regulations. III. Affected Entities and Taxpayers By providing clarity to the statutory definition of ``qualified tips'' and publishing the statutorily required list of occupations that customarily and regularly received tips on or before December 31, 2024, the proposed regulations affect taxpayers who wish to claim the deduction for qualified tips on their individual income tax returns beginning in taxable year 2025. Using confidential tax return data, the Treasury Department and the IRS estimate that, in 2026, more than 10 million returns will have tips reported on Form W-2, Form 1099-NEC, Form 1099-K, Form 1099-MISC, or Form 4137. IV. Economic Effects of the Proposed Regulations The Treasury Department and the IRS analyzed the economic effects of the proposed regulations in enumerating the list of occupations that customarily and regularly received tips on or before December 31, 2024, the clarification that ``qualified tips'' excludes tips received while performing services that are misdemeanors or felonies under applicable law, and the clarification that ``qualified tips'' for employees under tip agreements through the TRDA or GITCA programs include tips reported using the tip rates established under their agreement and additional tips reported on Form 4137. The projected economic costs and benefits of these proposed regulations are small. i. List of Occupations That Receive Tips The proposed regulations enumerate the List of Occupations that Receive Tips, as described in section 70201(h) of the OBBBA. Providing this list will provide clarity for taxpayers who are expected to receive qualified tips. While these clarifications will reduce uncertainty, the Treasury Department and the IRS project that the magnitude of the efficiency gains from publishing these proposed regulations would be small. a. Methodology To create the List of Occupations that Receive Tips, the Treasury Department and the IRS examined confidential income tax return data from tax year 2023; data from the GITCA and related programs; the House Budget Committee report on the OBBBA, H. Rept. No. 119-106, at 1502 (2025); guidance and caselaw related to the U.S. Department of Labor (DOL) Fair Labor Standards Act (FLSA); and survey data from the Panel Study of Income Dynamics (PSID) for years 2017, 2019, and 2023 (which asks about the occupation of and tip income received by individuals in 2016, 2018, and 2022, respectively). Based on prior guidance under the FLSA, the Treasury Department and the IRS determined that individuals must have received cash tips more often than occasionally (for example, not only on annual holidays or other celebrations) during a calendar year ending on or before December 31, 2024, in order for their occupation to be considered as having customarily and regularly received tips on or before December 31, 2024. While reviewing the data, the Treasury Department and the IRS recognized that the occupations identified as having customarily and regularly received tips on or before December 31, 2024, were in the service industry, and the individuals working in the occupations either interacted with the customers for whom they were providing a service or commonly participated in tip-sharing arrangements with individuals who interacted with customers. The inclusion of occupations that may not interact with customers but received tips from tip-sharing arrangements with individuals who interacted with customers departs from the interpretation of the term ``customarily and regularly received tips'' that courts and the DOL have used regarding the FLSA.\23\ The prior guidance and court cases related to the FLSA require that the employee has some level of interaction with customers in order to be considered an occupation that customarily and regularly receives tips.\24\ However, this is due to differences in the specific language, purpose, and history of the FLSA tip credit and mandatory tip-sharing arrangement provisions. For instance, the FLSA provides that when an employer takes a tip credit, the employer may require ``the pooling of tips'' only among employees who customarily and regularly receive tips, 29 U.S.C. 203(m)(2)(A); this presumes that, under the FLSA, an employee is not customarily and regularly tipped merely by virtue of receiving tips from a pool. In contrast, section 224(d)(3) defines ``cash tips'' to include both tips receive from customers and, in the case of an employee, tips received under any tip-sharing arrangement. As a result, occupations in which employees are commonly included in tip-sharing arrangements would be considered as having ``customarily and regularly'' received tips for purposes of the deduction for qualified tips under section 224. --------------------------------------------------------------------------- \23\ See supra, Explanation of Provisions, Sec. 4.A. \24\ See Montano v. Montrose Rest. Assocs., Inc., 800 F.3d 186, 189 (5th Cir. 2015) (noting that ``[i]t would be circular'' to interpret the FLSA to mean that if an employer requires a tipped employee to give a second employee tips, that second employee customarily and regularly receives tips for purposes of 29 U.S.C. 203(m)(2)(A)'s tip pooling limitation). --------------------------------------------------------------------------- After identifying the occupations that customarily and regularly received tips on or before December 31, 2024, the Treasury Department and the IRS created a categorization system to organize and define the occupations for purposes of the deduction for qualified tips. Each occupation was assigned a TTOC code, an occupation title, a short description of the types of services performed by individuals working in the occupation, illustrative examples of specific occupations that would be included under the occupation code, and the related SOC System code(s). b. Alternative Methods Considered In addition to the method described above, the Treasury Department and the IRS considered two alternative methods for creating the List of Occupations that Receive Tips. These alternative methods were (1) using the SOC Code System to define occupations and (2) using only the confidential income tax return data to identify occupations that reported tips. These alternative methods both excluded some occupations that customarily and regularly received tips on or before December 31, 2024, and also included some occupations that did not in reality customarily and regularly receive tips on or before December 31, 2024. Therefore, the approach to produce the List of Occupations that Receive Tips included in these proposed regulations was selected over the alternatives described below. One of the alternative methods that the Treasury Department and the IRS considered to construct the List of Occupations that Receive Tips was to use the occupation definitions from the SOC system.\25\ However, the Treasury [[Page 45349]] Department and the IRS determined that several of the detailed SOC occupations were not sufficiently detailed to separate occupations that should be included on the List of Occupations that Receive Tips, from those that should not. For example, the SOC code for ``Animal Caretakers'' is described in the 2018 SOC Code system as an occupation in which individuals ``provide care to promote and maintain the well- being of pets and other animals that are not raised for consumption.'' The specific occupations that are provided as illustrative examples for this SOC code include both pet caretakers and zookeepers. Pet caretakers provide a service to individual customers, personally interact with customers, and commonly receive tips on a frequent basis. Therefore, they would be considered an occupation that customarily and regularly receives tips. Zookeepers, on the other hand, provide a service to animals but not directly to customers. Many, if not most, zookeepers do not interact with zoo customers, and zookeepers do not receive tips on a frequent basis. Zookeeper is therefore not an occupation that customarily and regularly received tips. Thus, if the ``Animal Caretakers'' SOC Code were included in the list of occupations that customarily and regularly received tips, then zookeepers would become part of the list via their corresponding SOC Code, even though they did not customarily and regularly receive tips. Thus, using the SOC system alone was not sufficient for creating the List of Occupations that Receive Tips. --------------------------------------------------------------------------- \25\ The SOC Code system is published by the Executive Office of the President, Office of Management and Budget. The SOC Code system is a Federal statistical standard used by Federal agencies to classify workers into occupational categories for the purposes of collecting, calculating, or disseminating data. See Office of Management and Budget. (2018). Standard Occupational Classification Manual. U.S. Government Publishing Office. This manual and other related SOC documents can be found at https://www.bls.gov/soc. --------------------------------------------------------------------------- For the method that was selected instead of using the SOC System, the Treasury Department and the IRS created a new categorization system. The descriptions and illustrative examples for the occupation codes in this new system often mirror their SOC code counterparts, and it includes the SOC code(s) that are related to each TTOC occupation. Of the 867 detailed SOC codes in the 2018 SOC Code System, 77 of these codes are related to at least one TTOC occupation. A second alternative method that the Treasury Department and the IRS considered was to use only confidential income tax return data to identify occupations that customarily and regularly received tips on or before December 31, 2024. This data includes reported tips from Form W- 2 and Form 4137 and the occupation that the taxpayer (the primary filer and, if married filing jointly, the spouse) self-reports next to the taxpayer's signature on Form 1040. Individuals in some occupations, such as rideshare drivers, often operate as independent contractors rather than employees and do not receive Form W-2 or file Form 4137 related to their rideshare activity. Thus, using only the income tax return data would have omitted these occupations, even though individuals in such occupations did in fact regularly and customarily receive tips on or before December 31, 2024. In addition, the analysis of the income tax return data may have incomplete information on certain occupations due to variations in how taxpayers choose to self- report their occupation on Form 1040. For example, the self-reported occupation may have typographical errors or abbreviations, or taxpayers may write multiple occupations separated by a comma or a slash mark, like ``Occupation 1/Occupation 2.'' \26\ These variations in how taxpayers reported their occupation on Form 1040 made it difficult for the data analysis to capture all taxpayers with a given occupation (in the sense of what job they actually performed, rather than what they wrote on the Form 1040) together. This was particularly problematic for certain occupations that have more variations in how they were reported. --------------------------------------------------------------------------- \26\ Taxpayers have a single line to report their occupation on the Form 1040. If they have multiple occupations, they may write the occupation for only one of their jobs or they may write multiple occupations. However, when analyzing the tax return data, it would be difficult to determine to which job any reported tips should be assigned when a taxpayer has multiple jobs. Therefore, the Treasury Department and the IRS limited the main analysis of the tax return data to taxpayers with only one job. However, even among this sample, some taxpayers may write both the occupation from their job and a title for a role where they may not receive income, such as ``Student/Occupation.'' --------------------------------------------------------------------------- Due to these limitations, the Treasury Department and the IRS rejected the method of only using the tax return data to create the List of Occupations that Receive Tips. Instead, the tax return data was supplemented with data from the GITCA and related programs; the House Budget Committee report on the OBBBA, H. Rept. No. 119-106, at 1502 (2025); guidance and caselaw related to the DOL FLSA; and survey data from the PSID. c. Statistics on Reported Tip Income in Tax Return Data Table A below contains the List of Occupations that Receive Tips and statistics on their reported tip income. The table is organized by Treasury Tipped Occupation Code (TTOC) and contains the TTOC Occupation Title and the Related Standard Occupation Classification (SOC) System Code(s). (As previously described, the List of Occupations that Receive Tips in Table 1 of the proposed regulations also includes descriptions and illustrative examples of each TTOC occupation.) Table A summarizes taxpayer information from Tax Year 2023 on employees who have a single job, meaning they received only one Form W-2; did not file Schedule C, ``Profit or Loss from Business (Sole Proprietorship),'' or Schedule F, ``Profit or Loss From Farming;'' and did not have non-passive income from a partnership or an S-corporation on Schedule E, ``Supplemental Income and Loss (From rental real estate, royalties, partnerships, S corporations, estates, trusts, Real Estate Mortgage Investment Conduits, etc.).'' \27\ --------------------------------------------------------------------------- \27\ Since tips are reported separately from other compensation for employees but not for self-employed individuals in the current tax return data, these screening criteria that limit the sample to employees with a single job were utilized to better illuminate the link between the self-reported occupations and reported tips. --------------------------------------------------------------------------- Table A shows the percentage of individuals within the Related SOC code(s) who have at least $100 of tips reported on Form W-2 or Form 4137. For example, 82.8 percent of individuals who had the SOC code related to the TTOC Occupation Title of ``Bartenders'' had at least $100 of tips reported on Form W-2 or Form 4137. Table A also shows the amount of reported tips of individuals in the Related SOC code(s) as a percentage of all reported tips. The numerator of the percentage is the amount of reported tips of individuals in the Related SOC code(s) who had any tips reported on Form W-2 or Form 4137. The denominator is the amount of reported tips of all individuals, regardless of whether their occupation could be mapped to a SOC code or if their SOC code is related to a TTOC. For example, 34.2 percent of all reported tips are from individuals who had the SOC code related to the TTOC Occupation Title of ``Wait Staff.'' Lastly, Table A shows reported tips as a percent of wage compensation for individuals in Related SOC code(s) who had reported tips. Wage compensation is the sum of wages, tips, and other compensation reported in Box 1 of Form W-2 and unreported tips from line 4 of Form 4137. For example, among individuals with SOC Codes related to the TTOC Occupation Title of [[Page 45350]] ``Gambling Dealers'' who had reported tips on Form W-2 or Form 4137, reported tips were 70.7 percent of wage compensation. Table A--Reported Tips of Single-Job Holders, Tax Year 2023 ---------------------------------------------------------------------------------------------------------------- Reported Percent Percent tips as Treasury tipped TTOC occupation with of all percent of Related standard occupational occupation code title reported reported wages of classification (SOC) system code (TTOC) tips \1\ tips \2\ tipped workers \3\ ---------------------------------------------------------------------------------------------------------------- Beverage & Food Service ---------------------------------------------------------------------------------------------------------------- 101............... Bartenders...... 82.8 9.8 63.4 35-3011. 102............... Wait Staff...... 74.6 34.2 63.5 35-3031. 103............... Food Servers, 30.4 0.1 33.0 35-3041. Nonrestaurant. 104............... Dining Room and 38.9 1.0 44.8 35-9011. Cafeteria Attendants and Bartender Helpers. 105............... Chefs and Cooks. 12.8 2.0 17.1 35-1011, 35-2011, 35-2013, 35-2014, 35- 2019. 106............... Food Preparation 21.4 3.3 33.5 35-1012, 35-2021, 35-9099. Workers. 107............... Fast Food and 40.1 1.4 17.9 35-3023. Counter Workers. 108............... Dishwashers..... 11.0 0.1 15.8 35-9021. 109............... Host Staff, 46.3 0.8 35.3 35-9031. Restaurant, Lounge, and Coffee Shop. 110............... Bakers.......... 12.0 0.1 14.7 51-3011. ---------------------------------------------------------------------------------------------------------------- Entertainment & Events ---------------------------------------------------------------------------------------------------------------- 201............... Gambling Dealers 70.9 4.3 70.7 39-3011, 39-1013, 39-3013. 202............... Gambling Change 78.0 0.4 64.8 41-2012. Persons and Booth Cashiers. 203............... Gambling Cage 37.6 0.2 57.7 43-3041. Workers. 204............... Gambling and 30.0 (*) 43.3 39-3012. Sports Book Writers and Runners. 205............... Dancers......... 8.8 (*) 54.3 27-2031. 206............... Musicians and 2.9 (*) 36.8 27-2042. Singers. 207............... Disc Jockeys, 15.7 (*) 44.9 27-2091. Except Radio. 208............... Entertainers and 7.9 (*) 52.0 27-2099. Performers. 209............... Digital Content 7.9 (*) 52.0 27-2099. Creators. 210............... Ushers, Lobby 3.1 (*) 11.6 39-3031. Attendants, and Ticket Takers. 211............... Locker Room, 12.0 (*) 19.1 39-3093. Coatroom, and Dressing Room Attendants. ---------------------------------------------------------------------------------------------------------------- Hospitality & Guest Services ---------------------------------------------------------------------------------------------------------------- 301............... Baggage Porters 7.0 0.1 18.6 39-6011. and Bellhops. 302............... Concierges...... 3.7 (*) 11.7 39-6012. 303............... Hotel, Motel, 11.7 0.7 42.8 43-4081. and Resort Desk Clerks. 304............... Maids and 2.7 0.1 10.6 37-2012. Housekeeping Cleaners. ---------------------------------------------------------------------------------------------------------------- Home Services ---------------------------------------------------------------------------------------------------------------- 401............... Home Maintenance 0.5 0.1 16.1 49-9071, 49-9098, 49-9099, 49-9063, 49- and Repair 2097, 51-7021. Workers. 402............... Home Landscaping 0.5 (*) 14.0 37-3011. and Groundskeeping Workers. 403............... Home 0.1 (*) 10.6 47-2111. Electricians. 404............... Home Plumbers... 0.2 (*) 5.1 47-2152. 405............... Home Heating and 0.2 (*) 4.0 49-9021. Air Conditioning Mechanics and Installers. 406............... Home Appliance 1.8 (*) 1.9 49-9031. Installers and Repairers. 407............... Home Cleaning 2.7 0.1 10.6 37-2012. Service Workers. 408............... Locksmiths...... 2.0 (*) 3.1 49-9094. 409............... Roadside 0.2 (*) 10.8 49-3023, 53-3032. Assistance Workers. ---------------------------------------------------------------------------------------------------------------- Personal Services ---------------------------------------------------------------------------------------------------------------- 501............... Personal Care 0.6 0.1 31.1 31-1122, 39-9099. and Service Workers. 502............... Private Event 5.9 0.1 16.3 13-1121, 27-1023. Planners. 503............... Private Event 2.3 (*) 22.0 27-4021. and Portrait Photographers. 504............... Private Event (*) (*) (*) 27-4031. Videographers. 505............... Event Officiants 0.2 (*) 16.8 21-2011. 506............... Pet Caretakers.. 19.1 0.3 16.2 39-2021. 507............... Tutors.......... 0.5 (*) 34.5 25-3041. 508............... Nannies and 0.7 (*) 28.8 39-9011. Babysitters. ---------------------------------------------------------------------------------------------------------------- Personal Appearance & Wellness ---------------------------------------------------------------------------------------------------------------- 601............... Skincare 54.7 0.5 24.4 39-5094. Specialists. [[Page 45351]] 602............... Massage 55.8 0.6 25.7 31-9011. Therapists. 603............... Barbers, 52.4 3.2 22.7 39-5012, 39-5011. Hairdressers, Hairstylists, and Cosmetologists. 604............... Shampooers...... (*) (*) (*) 39-5093. 605............... Manicurists and 36.2 0.3 14.9 39-5092. Pedicurists. 606............... Makeup Artists.. 13.1 (*) 14.8 39-5091. 607............... Exercise 1.0 (*) 25.8 39-9031. Trainers and Group Fitness Instructors. 608............... Tattoo Artists 11.1 (*) 15.8 27-1019. and Piercers. 609............... Tailors......... 0.8 (*) 15.9 51-6052. 610............... Shoe and Leather (*) (*) (*) 51-6041. Workers and Repairers. 611............... Eyebrow 53.2 3.0 22.6 39-5012. Threading and Waxing Technicians. ---------------------------------------------------------------------------------------------------------------- Recreation & Instruction ---------------------------------------------------------------------------------------------------------------- 701............... Golf Caddies.... 8.0 (*) 27.9 39-3091. 702............... Self-Enrichment 1.9 (*) 7.5 25-3021. Teachers. 703............... Sports and 1.9 (*) 7.5 25-3021. Recreation Instructors. 704............... Tour Guides..... 14.2 (*) 17.1 39-7011. 705............... Travel Guides... 13.3 (*) 16.2 39-7012. 706............... Recreational and (*) (*) (*) 53-2012. Tour Pilots. ---------------------------------------------------------------------------------------------------------------- Transportation & Delivery ---------------------------------------------------------------------------------------------------------------- 801............... Parking and 17.4 0.1 21.5 53-6021. Valet Attendants. 802............... Taxi and 24.9 (*) 21.2 53-3054. Rideshare Drivers and Chauffeurs. 803............... Shuttle Drivers. 16.7 0.1 28.0 53-3053. 804............... Goods Delivery 3.7 0.5 30.0 53-3031. People. 805............... Personal Vehicle 4.8 (*) 12.4 53-7061. and Equipment Cleaners. 806............... Private and 0.7 (*) 9.9 53-3052. Charter Bus Drivers. 807............... Water Taxi (*) (*) (*) 53-5022. Operators and Charter Boat Workers. 808............... Rickshaw, 0.8 (*) 21.4 53-6099. Pedicab, and Carriage Drivers. 809............... Home Movers..... 2.5 2.8 32.8 53-7062. --------------------------------------------------------------------------- Total......... ................ ......... \4\ 67.4 44.6 ....................................... ---------------------------------------------------------------------------------------------------------------- Notes: Data are for Tax Year 2023. An * indicates a share of less than 0.1% or a small cell size. \1\ Percentage of individuals within the Related SOC code(s) who have at least $100 of tips reported on a W-2 or Form 4137 (``reported tips''). \2\ Reported tips of individuals in Related SOC code(s) as a percentage of all reported tips. The denominator includes all individuals regardless of whether their occupation could be mapped to a SOC code or if their SOC code is related to a TTOC code. \3\ Reported tips of individuals in Related SOC code(s) as a percentage of wages of individuals with tips in Related SOC code(s). The denominator includes wages of individuals in Related SOC code(s) only if they report tips. \4\ Occupation codes are matched to SOC codes, which are then related to TTOC occupation titles, using the self- reported character strings in the ``Your occupation'' box next to the signature box on the Form 1040. The occupation box does not affect a taxpayer's tax liability, and taxpayers with a single W-2 sometimes enter an occupation (character string) that does not correspond to the W-2. For example, a student who was also a bartender might have entered ``Student'' in the occupation box, or they may have misspelled ``bartender'' as ``batrender''. In either case, we would not be able to match the ``Student'' or ``batrender'' who received tips to a TTOC code. These data shortcomings are the primary reason that the percentage of all reported tips for occupations listed in the table sum to only 67.4%. Source: Office of Tax Analysis, August 9, 2025. d. Economic Effects In general, OBBBA granted taxpayers the deduction for income earned in the form of qualified tips. In the absence of the list enumerated by these proposed regulations, two taxpayers with otherwise similar tax situations would face uncertainty as to whether this tax deduction applies to their situation. In the absence of this guidance, these taxpayers might make different choices as to whether their tips qualify for the deduction, and, therefore, face different tax liability. By enumerating the List of Occupations that Receive Tips, these proposed regulations ensure that these two taxpayers face the same tax treatment. Consider an example where Employee A is a hairstylist and Employee B is a makeup artist, both working at Beauty Salon 1. Employee A and Employee B each receives $10,000 in tips from customers at Beauty Salon 1. The House Budget Committee report on the OBBBA, H. Rept. 119-106, at 1502 (2025) included hairstylists but not makeup artists in its examples of occupations that traditionally and customarily \28\ received tips on or before December 31, 2024. Thus, prior to reading the guidance in theses proposed regulations, Employee B might have been unsure whether her occupation as a makeup artist makes her eligible to claim the deduction for her qualified tips. By enumerating this list, Employee A and Employee B have clarity that they are both eligible to use the $10,000 in tips that they receive while working at Beauty Salon 1 for purposes of the deduction in section 224 (assuming that [[Page 45352]] all other requirements to claim the deduction are satisfied). --------------------------------------------------------------------------- \28\ Initial drafts of the OBBBA legislation contemplated a deduction for tips received by individuals in occupations that traditionally and customarily received tips, but this language was later revised to refer to occupations that customarily and regularly received tips. --------------------------------------------------------------------------- Some taxpayers may reclassify their occupation as described on their Form 1040 to fall under a category that appears on the List of Occupations that Receive Tips. This reclassification would merely be a relabeling of their reported occupation and does not constitute a meaningful economic change. Due to the tax preference granted by the statute, some taxpayers may genuinely change occupations to one which appears on the List of Occupations that Receive Tips. This effect is ascribed to the statute. ii. Illegal Activity The proposed regulations clarify that the term ``qualified tips'' does not include tips that were received while performing a service that is a felony or misdemeanor under applicable law. For example, tips received while performing services in human trafficking, exotic pet smuggling, counterfeiting or fencing stolen goods, drug trafficking, drug dealing, and unlicensed sales that violate the applicable law would not be eligible for the deduction for qualified tips. The Treasury Department and the IRS do not have sufficient data to determine the behavioral effects of the clarification that the tips are excluded from the definition of ``qualified tips'' if they were earned while performing illegal activities. The Treasury Department and the IRS also do not have readily available data and models to assess the economic costs and benefits of excluding these tips from the definition of ``qualified tips,'' but the economic impact is expected to be low. However, the Treasury Department and the IRS invite comments on such costs and data that could be used to analyze these behavioral effects. For example, consider Employee C who works as a bartender but does not have the license or certification that is required based on the applicable laws, and these laws specify that serving alcohol without a license is a misdemeanor. Employee C receives $10,000 in tips during the year while serving alcohol at a bar. ``Bartender'' is on the List of Occupations that Receive Tips, but serving alcohol as a bartender without the proper license violates the applicable law. Because the proposed regulations clarify that the definition of ``qualified tips'' excludes tips received while performing services that violate the applicable law, Employee C is aware that the $10,000 in tips received while serving alcohol without a license are not qualified tips, and so Employee C does not claim the deduction for these tips. Alternatively, consider a different example where Restaurant 2 includes a bar that serves alcohol but does not have the liquor license required by the applicable laws. Employee D works on the wait staff at Restaurant 2 and does not serve alcohol, which the applicable laws allow. Employee D receives $10,000 in tips while waiting tables at Restaurant 2. They satisfy all other requirements to claim the deduction under section 224. Because the proposed regulations clarify that ``qualified tips'' exclude tips received while performing services that are illegal under applicable law, and the services that Employee D provided as a wait person were legal, Employee D understands that the $10,000 in tips are considered ``qualified tips'' and Employee D claims the deduction accordingly. The clarification in the proposed regulations, that tips are not considered ``qualified tips'' if they were received while performing services that are illegal under applicable law, provides clarity for taxpayers about whether their tips qualify for the tax deduction under section 224, as instituted by the OBBBA. iii. Employees Participating in Voluntary Tip Reporting Programs With Tip Rates The proposed regulations clarify that employees who enter into a tip agreement through the TRDA or GITCA program may determine the amount of their qualified tips using applicable tip rates in their agreement (as these tips are reported on Form W-2), as well as amounts reported to the IRS on Form 4137. This would not affect the behavior of employees in agreements under the TRDA or GITCA programs as they are required to report their tips (regardless of whether they are eligible for the deduction under section 224) using average tip rates for their occupational category that their employer and the IRS have established. For example, suppose Employee E and Employee F both work as gambling dealers at Casino 3, and they both have a tip agreement as part of the GITCA program. Employee E receives $11,000 in tips for the year, and Employee F receives $12,000 in tips. The tip rate established by the IRS and their employer for their occupation in the tip agreement requires them to report $10,000 in tips. The Forms W-2 for Employee E and Employee F from Casino 3 each report $10,000 in tips. Due to the clarification in the proposed regulations about the definition of ``qualified tips'' for employees under a tip agreement through the TRDA or GITCA program, Employee E and Employee F each understand that they may claim a deduction for $10,000 in qualified tips (if the other requirements of section 224 are met) as those tips were reported to the IRS and Casino 3 in accordance with the tip rate established in their tip agreement. Some employees under a tip agreement through the TRDA or GITCA programs may decide to report the full amount of their tips (in excess of the tip rate established in their tip agreement) to the IRS on Form 4137 or to their employer. These employees would use that full amount as qualified tips for the deduction under section 224. Any change in the reporting of tip income in excess of the established tip rates is ascribed to the statute, which creates the deduction for qualified tips that are reported on Form W-2 or Form 4137 (as well as Form 1099-NEC, Form 1099-K, and Form 1099-MISC). iv. Summary Based on the available models and data, the Treasury Department and the IRS estimate that the economic costs and benefits of the proposed regulations would be small. The Treasury Department and the IRS invite public comments and additional data on the economic effects that would result from these proposed regulations. II. Paperwork Reduction Act This proposed regulation does not create new collection requirements, as defined under the Paperwork Reduction Act (44 U.S.C. 3501-3520), and does not alter any previously approved OMB information collection requirements and their associated burden. III. Regulatory Flexibility Act The Secretary of the Treasury certifies that these proposed regulations will not have a significant economic impact on a substantial number of small entities pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6). This certification is based on the fact that these proposed regulations would not impose any new requirements on small entities but rather provide individuals rules for claiming the deduction under section 224 of the Code by specifying the scope of affected occupations as those contained in the proposed regulations and providing clarity on the definition of qualified tips. Because the regulation does not directly impact small entities a Regulatory Flexibility Act (5 U.S.C. chapter 6) analysis is not required. Notwithstanding this certification that the proposed regulations would not have a significant economic impact on a substantial number of small entities, [[Page 45353]] the Treasury Department and the IRS invite comments on the impacts these proposed regulations may have on small entities. IV. Section 7805(f) Pursuant to section 7805(f) of the Code, these proposed regulations will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business. V. Unfunded Mandates Reform Act Section 202 of the Unfunded Mandates Reform Act of 1995 requires that agencies assess anticipated costs and benefits and take certain other actions before issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a State, local, or Tribal government, in the aggregate, or by the private sector, of $100 million in 1995 dollars, updated annually for inflation. These proposed regulations do not include any Federal mandate that may result in expenditures by State, local, or Tribal governments, or by the private sector, in excess of that threshold. VI. Executive Order 13132: Federalism Executive Order 13132 (Federalism) prohibits an agency from publishing any rule that has federalism implications if the rule either imposes substantial, direct compliance costs on State and local governments, and is not required by statute, or preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Executive order. These proposed regulations do not have federalism implications, do not impose substantial direct compliance costs on State and local governments, and do not preempt State law within the meaning of the Executive order. Comments and Public Hearing Before these proposed regulations are adopted as final regulations, consideration will be given to comments regarding the notice of proposed rulemaking that are submitted timely to the IRS as prescribed in this preamble under the ADDRESSES section. The Treasury Department and the IRS request comments on all aspects of the proposed regulations. In particular, the Treasury Department and IRS request comments on the application of the existing rules under Sec. 1.199A- 5(b) to the SSTB definition in section 224, and whether the definitions in Sec. 1.199A-5(b) should be refined to better align with the anti- abuse provision in section 224 and the congressional directive for the Secretary to publish a list of occupations that customarily and regularly received tips on or before December 31, 2024. Additionally, Treasury and the IRS are concerned that taxpayers might misclassify income as tips and request comments on how to address this issue in the final regulations. All comments will be made available at https://www.regulations.gov. Once submitted to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. A public hearing has been scheduled for October 23, 2025, beginning at 10 a.m. ET, in the Auditorium at the Internal Revenue Building, 1111 Constitution Avenue NW, Washington, DC. Due to building security procedures, visitors must enter at the Constitution Avenue entrance. In addition, all visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance area more than 30 minutes before the hearing starts. Participants may alternatively attend the public hearing by telephone. The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present oral comments at the hearing must submit an outline of the topics to be discussed and the time to be devoted to each topic by October 22, 2025. A period of 10 minutes will be allotted to each person for making comments. An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be available free of charge at the hearing. If no outline of the topics to be discussed at the hearing is received by October 22, 2025, the public hearing will be cancelled. If the public hearing is cancelled, a notice of cancellation of the public hearing will be published in the Federal Register. Individuals who want to testify in person at the public hearing must send an email to [email protected] to have your name added to the building access list. The subject line of the email must contain the regulation number REG-110032-25 and the language TESTIFY In Person. For example, the subject line may say: Request to TESTIFY in Person at Hearing for REG-110032-25. Individuals who want to testify by telephone at the public hearing must send an email to [email protected] to receive the telephone number and access code for the hearing. The subject line of the email must contain the regulation number REG-110032-25 and the language TESTIFY Telephonically. For example, the subject line may say: Request to TESTIFY Telephonically at Hearing for REG-110032-25. Individuals who want to attend the public hearing in person without testifying must also send an email to [email protected] to have your name added to the building access list. The subject line of the email must contain the regulation number REG-110032-25 and the language ATTEND In Person. For example, the subject line may say: Request to ATTEND Hearing In Person for REG-110032-25. Requests to attend the public hearing must be received by 5:00 p.m. ET on October 21, 2025. Individuals who want to attend the public hearing by telephone without testifying must also send an email to [email protected] to receive the telephone number and access code for the hearing. The subject line of the email must contain the regulation number REG- 110032-25 and the language ATTEND Hearing Telephonically. For example, the subject line may say: Request to ATTEND Hearing Telephonically for REG-110032-25. Requests to attend the public hearing must be received by 5:00 p.m. ET on October 21, 2025. Hearings will be made accessible to people with disabilities. To request special assistance during a hearing please contact the Publications and Regulations Section of the Office of Associate Chief Counsel (Procedure and Administration) by sending an email to [email protected] (preferred) or by telephone at (202) 317-6901 (not a toll-free number) by October 20, 2025. Drafting Information The principal author of these proposed regulations is the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations and Employment Taxes). However, other personnel from the IRS and the Treasury Department participated in their development. List of Subjects in 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. Proposed Amendments to the Regulations Accordingly, the Treasury Department and the IRS propose to amend 26 CFR part 1 as follows: PART 1--INCOME TAXES 0 Paragraph 1. The authority citation for part 1 is amended by adding an entry for Sec. 1.224-1 in numerical order to read in part as follows: [[Page 45354]] Authority: 26 U.S.C. 7805 * * * * * * * * Sec. 1.224-1 also issued under 26 U.S.C. 224(d)(2)(C) and (g) and sec. 70201(h) of Public Law 119-21, 139 Stat. 72 (July 4, 2025), commonly known as the One, Big, Beautiful Bill Act. * * * * * 0 Par. 2. Section 1.224-1 is added to read as follows: Sec. 1.224-1 Qualified tips. (a) In general. Under section 224(a) of the Internal Revenue Code (Code), there shall be allowed a deduction under section 63(b) for an amount equal to the qualified tips received by an individual during the taxable year that are included separately on statements furnished to the individual pursuant to section 6041(d)(3), section 6041A(e)(3), section 6050W(f)(2), or section 6051(a)(18) of the Code, or reported by the taxpayer on Form 4137, Social Security and Medicare Tax On Unreported Tip Income (or successor). (b) Deduction limitations--(1) In general. The amount allowed as a deduction under section 224(a) and paragraph (a) of this section for any taxable year shall not exceed $25,000, regardless of filing status. (2) Limitation based on adjusted gross income. After the application of the limitation in paragraph (b)(1) of this section, the amount allowable as a deduction under section 224(a) and paragraph (a) of this section shall be further reduced (but not below zero) by $100 for each $1,000 by which the taxpayer's modified adjusted gross income exceeds $150,000 ($300,000 in the case of a joint return). For purposes of this paragraph (b)(2), modified adjusted gross income means the adjusted gross income of the taxpayer from the taxable year increased by any amount excluded from gross income under section 911, section 931, or section 933. (3) Examples. The following examples illustrate the rules of paragraphs (b)(1) and (2) of this section. (4) Example 1. Employee A satisfies all the requirements under section 224 and Employee A's filing status for 2025 is single. A received $26,000 in qualified tips in 2025. Since this is greater than the $25,000 limitation in paragraph (b)(1) of this section, the $26,000 qualified tip amount is first reduced from $26,000 to $25,000. A's modified adjusted gross income for 2025 is $200,000. The qualified tip amount is further reduced (but not below zero) by $100 for each $1,000 by which A's modified adjusted gross income exceeds $150,000 (the threshold for a single filer). A's modified adjusted gross income exceeds $150,000 by $50,000. To calculate the deduction, A first divides $50,000 by $1,000 to get 50. Thus, A's deduction under section 224(b)(2) is further reduced by $5,000 ($100 x 50), from $25,000 to $20,000. (5) Example 2. Employee K satisfies all the requirements under section 224 and Employee K's filing status for 2025 is single. K received $10,000 in qualified tips in 2025. Since this amount is less than $25,000, the limitation in paragraph (b)(1) of this section does not apply. K's modified adjusted gross income for 2025 is $180,000. K's deduction is reduced (but not below zero) by $100 for each $1,000 by which K's modified adjusted gross income exceeds $150,000 (the threshold for a single filer). K's modified adjusted gross income exceeds $150,000 by $30,000. To calculate the deduction, K first divides $30,000 by $1,000 to get 30. Thus, K's deduction under section 224(b)(2) is reduced by $3,000 ($100 x 30), from $10,000 to $7,000. (c) Qualified tips defined--(1) In general. Subject to the requirements in paragraph (c)(3) of this section, qualified tips are amounts received as cash tips (as defined in paragraph (c)(2) of this section) by an individual in an occupation that customarily and regularly received tips on or before December 31, 2024, as provided in paragraph (f) of this section. (2) Cash tips defined. For purposes of paragraph (c)(1) of this section, cash tips are tips received from customers or, in the case of an employee, through a mandatory or voluntary tip-sharing arrangement, such as a tip pool, that are paid in a cash medium of exchange, including by cash, check, credit card, debit card, gift card, tangible or intangible tokens that are readily exchangeable for a fixed amount in cash (such as casino chips), and any other form of electronic settlement or mobile payment application that is denominated in cash. Cash tips do not include items paid in any medium other than cash, such as event tickets, meals, services, or other assets that are not exchangeable for a fixed amount in cash (such as most digital assets). For purposes of this paragraph (c)(2), tips are amounts paid by customers for services that are in excess of the amount agreed to, required, charged, or otherwise reasonably expected to have to be paid for the services in an arm's-length transaction. (3) Amounts must be paid voluntarily. Amounts are qualified tips only if they are paid voluntarily and without any consequence in the event of nonpayment, are not the subject of negotiation, and are determined by the payor. Qualified tips must be paid without compulsion. Thus, service charges, automatic gratuities and any other mandatory amounts automatically added to a customer's bill by the vendor or establishment are not qualified tips, even if the amounts are subsequently distributed to employees. If a customer is expressly provided an option to disregard or modify amounts added to a bill, such amounts are not mandatory amounts. (i) Examples. The following examples illustrate the rules of this paragraph (c)(3). Unless otherwise indicated, each example assumes that other requirements for claiming the deduction under section 224 are satisfied. (ii) Example 1. Restaurant W's menu specifies that an automatic 18% charge will be added to all bills for parties of six or more customers. Customer D's bill for food and beverages for her party of six includes the 18% charge on the ``tip line'' and the total bill includes this amount. Restaurant W distributes this amount to the waitstaff and bussers. Customer D did not determine the amount of the additional charge, nor was Customer D expressly provided an option to disregard or modify the amount. Customer D did not make the payment free from compulsion. Under these circumstances, the 18% charge is not a qualified tip for purposes of the deduction under section 224. (iii) Example 2. The facts are the same as in paragraph (c)(3)(ii) of this section (Example 1) except the bill has a line labeled ``additional tip amount.'' In this case, Customer D adds on the ``additional tip line'' an amount equal to 2% of the price for food and beverages. As in paragraph (c)(3)(ii) of this section (Example 1), the 18% charge is not a qualified tip for the purposes of the deduction under section 224. However, the 2% additional amount is a qualified tip for the purposes of the deduction under section 224, because Customer D voluntarily paid the 2% additional amount without compulsion. (iv) Example 3. Customer E dines at Restaurant X with a party of eight people. E's bill for food and beverages for the party of eight includes a ``recommended tip'' equal to 18% of the price for food and beverages. However, there is a line for the customer to subtract (including to zero) or add to the recommended tip amount before paying the bill. Customer E subtracts 3% from the recommended tip amount resulting in a tip of 15% of the price for food and beverages. Customer E had a right to determine the additional amount, and he was expressly provided the option to disregard or modify the ``recommended [[Page 45355]] tip'' amount. Under these circumstances, the recommended 18% amount is not a service charge. Rather, the 15% amount that the customer voluntarily paid without compulsion is a qualified tip for purposes of the deduction under section 224. (v) Example 4. Customer F has a meal at Restaurant Y. The server presents the bill for the meal to Customer F on an electronic handheld point of sale (POS) device. The POS device includes the charges for each food and beverage item and the applicable tax. The POS device also prompts Customer F to leave a tip and provides the following options for Customer F: 15%, 18%, 20%, other, and no tip. Customer F selects 18% and pays the total balance via credit card through the POS device. Customer F had a right to determine the additional amount, and Customer F was expressly provided the option to leave no tip. Under these circumstances, the 18% amount is a qualified tip. (vi) Example 5. The facts are the same as in paragraph (c)(3)(v) of this section (Example 4), but the choices on the POS device are 15%, 18%, and 20%. Customer F must select a ``tip amount'' before paying the bill. Customer F selects 15% and pays the total balance via credit card through the POS device. Customer F did not voluntarily determine the amount of the additional charge because Customer F was forced to select an amount greater than zero. Customer D was not expressly provided an option to disregard or modify the amounts presented. Customer D did not make the payment free from compulsion. Under these circumstances, the 15% charge is not a qualified tip for purposes of the deduction under section 224. (vii) Example 6. The facts are the same as in paragraph (c)(3)(vi) of this section (Example 5), but Customer F selects 18% and pays the total balance via credit card through the POS device. Customer F did not voluntarily determine the lowest required amount (15%) of the additional charge because Customer F was forced to select an amount greater than zero. Customer F was not expressly provided an option to disregard or modify the amounts presented. Customer F did not make the payment of 15% free from compulsion. Under these circumstances, 15% of the charge is not a qualified tip for purposes of the deduction under section 224. However, the 3% additional amount is a qualified tip for the purposes of the deduction under section 224, because Customer F voluntarily, without compulsion, paid the 3% additional amount. (viii) Example 7. Self-employed painter G is hired by customer Z to paint customer Z's house. Included in the service contract between painter G and customer Z is a provision adding a 15% service charge to the total cost of the final bill. After the service contract is signed by both painter G and customer Z, painter G completes the painting services. After the painting services are completed, customer Z pays the amount agreed upon in the service contract, including the 15% service charge. In addition, customer Z pays painter G a cash tip amount, not provided for in the service agreement, equal to 10% of the final bill. The 15% service charge is not a qualified tip because it was included in the service contract before the painting services were provided and painter G's performance of the painting services was conditioned on the agreement to pay the 15% service charge. However, because the 10% cash tip amount was not included in the service agreement, and because customer Z voluntarily paid the 10% cash tip amount without compulsion, the 10% cash tip amount is a qualified tip for purposes of the deduction under section 224. (ix) Example 8. Shuttle Driver S enters into a contract with Customer Q. Under the terms of the contract, Shuttle Driver S will drive Customer Q to the airport for either $60 (consisting of a $50 charge and a 20% gratuity) or $65 (consisting of just the charge for the service with no gratuity). The contract states that an additional tip based on the service provided is welcome. Customer Q selects the first option and pays Shuttle Driver S $60. After arriving at the airport, Customer Q pays Shuttle Driver S an additional $5. The 20% gratuity is not a qualified tip because it was not paid voluntarily, and not providing the 20% gratuity would have resulted in Customer Q paying a higher amount. However, the additional $5 amount added after the service was completed is made without compulsion and is a qualified tip for purposes of this section. (x) Example 9. Landscaper L is self-employed and enters into a contract to install a new patio for Customer O for $5,000. When the services are complete, Customer O pays Landscaper L $5,100, and tells Landscaper L that the additional $100 is a tip for L's services. Landscaper L records the payment on the business's books as a charge for $4,500 for installation of the patio and $600 as a tip. The amount of the qualified tip is $100 because this is the amount that was determined by the payor (the customer). The additional $500 is not a qualified tip because it was not paid voluntarily and was not designated by the payor (the customer). Amounts reclassified by the service provider from the agreed contract price are not qualified tips but are instead part of the charge for services. The additional $500 also is not a tip because it is not in excess of the amount that was agreed to be paid for L's services. (4) Special rules regarding a specified service trade or business. An amount received by an individual in the course of a specified service trade or business (as defined in section 199A(d)(2) of the Code) is not a qualified tip. If the individual performs services as an employee, the relevant trade or business is the trade or business of the employer in the course of which the employee is performing services. Thus, an amount received by an employee performing services for the employee's employer in the course of a specified service trade or business operated by the employee's employer is not a qualified tip, regardless of whether the trade or business or an owner of the trade or business is eligible for a deduction under section 199A, and regardless of whether the employee is performing services in an occupation listed in paragraph (f) of this section or whether that occupation is a specified service trade or business. (i) Examples. The following examples illustrate the rules of this paragraph (c)(4). Unless otherwise indicated, each example assumes that other requirements for claiming the deduction under section 224 are satisfied. (ii) Example 1. Self-employed Comedian C performs a stand-up comedy routine at Performance Venue V. The audience members at Performance Venue V give Comedian C cash tips after the performance. The cash tips received by Comedian C are not qualified tips because the tips are received in the course of Comedian C's trade or business in the performing arts, which is a specified service trade or business. Such cash tips are not qualified tips notwithstanding the fact that Comedian C's occupation (comedian) is included in the Treasury Tipped Occupation Code (TTOC) category of ``Entertainers and performers,'' on the list of occupations that customarily and regularly received tips on or before December 31, 2024, as provided in paragraph (f) of this section. (iii) Example 2. Pianist P is an employee of Hotel H. Hotel H does not operate a trade or business that is a specified service trade or business. Pianist P plays the piano in the lobby of Hotel H. Hotel H's patrons often leave cash tips in a jar on the piano for Pianist P. The cash tips received by Pianist P [[Page 45356]] are qualified tips, even though the tips are received for services in the performing arts, which is a specified service trade or business, because Pianist P is performing services as an employee, the employer (Hotel H) is not operating a specified service trade or business, and Pianist P's occupation (piano player) is included in the TTOC category of ``Musicians and singers,'' on the list of occupations that customarily and regularly received tips on or before December 31, 2024, as provided in paragraph (f) of this section. (iv) Example 3. Bartender B is an employee of Company R. Company R does not operate a trade or business that is a specified service trade or business. Theater T enters into a contract with Company R to provide bartending services during the intermission of certain live performances occurring at Theater T. During the intermissions, Bartender B receives cash tips from patrons at Theater T. The cash tips are qualified tips because Bartender B is performing services as an employee, the employer (Company R) is not engaged in a specified service trade or business, and the employee's occupation (bartender) is included in the TTOC category of ``Bartenders'' on the list of occupations that customarily and regularly received tips on or before December 31, 2024, as provided in paragraph (f) of this section. (5) Employees participating in voluntary tip reporting programs with tip rates. Employees who enter into a Tipped Employee Participation Agreement as part of the Tip Reporting Determination Agreement (TRDA) program or a Model Gaming Employee Tip Reporting Agreement as part of the Gaming Industry Tip Compliance Agreement (GITCA) program may determine the amount of qualified tips using the applicable tip rate in their agreement (and amounts reported on Form 4137 (or successor)) in lieu of reporting actual tips received. The use of the TRDA or GITCA program to determine qualified tips for purposes of this section will not affect the tip audit protection otherwise applicable to the employee's agreement. Employees participating in the TRDA or GITCA program remain subject to all remaining requirements in section 224 and this section regarding eligibility for the deduction. (6) Illegal activity. Any amount received for a service the performance of which is a felony or misdemeanor under applicable law is not a qualified tip. (7) Prostitution. Any amount received for prostitution services is not a qualified tip. (8) Pornography. Any amount received for pornographic activity is not a qualified tip. (9) No ownership in or employment by payor. A tip received by an employee or other service provider who has an ownership interest in or is employed by the payor of the tip is not a qualified tip. (d) Trade or business limitations for tips received in course of trade or business--(1) In general. In the case of qualified tips received by an individual during any taxable year in the course of a trade or business (other than a trade or business of performing services as an employee) of such individual, such qualified tips shall be deducted only to the extent that the gross income for the taxpayer from such trade or business for such taxable year (including such qualified tips) exceeds the sum of the deductions (other than the deduction allowed for qualified tips) allocable to the trade or business in which such qualified tips are received by the individual for the taxable year. The deduction allowed for qualified tips is not taken into account for this purpose because it is not a trade or business deduction. Thus, generally, for self-employed taxpayers, the deduction under section 224 for a trade or business is limited to the individual's net income (without regard to the section 224 deduction) from that trade or business. (2) Examples. The following examples illustrate the rule of paragraph (d)(1) of this section. (3) Example 1. Manicurist M is self-employed and owns a nail salon. Manicurist M has no other employment. For the taxable year, Manicurist M has gross income of $100,000 that consists of $70,000 of fees for services at the nail salon and $30,000 of qualified tips. Manicurist M's total deductible expenses (other than the deduction for qualified tips) are $40,000. Manicurist M's gross income of $100,000 from the trade or business exceeds the sum of the deductions for that trade or business (other than qualified tips) by $60,000 ($100,000-$40,000 = $60,000). Because the maximum deduction under section 224 and paragraph (b)(1) of this section is $25,000, Manicurist M is permitted to deduct $25,000. (4) Example 2. Manicurist M is self-employed and owns a nail salon. Manicurist M has no other employment. For the taxable year, Manicurist M has gross income of $75,000 that consists of $55,000 of fees for services at the nail salon and $20,000 of qualified tips. Manicurist M's total deductible expenses (other than the deduction for qualified tips) are $60,000. Manicurists M's gross income of $75,000 from the trade or business exceeds the sum of the deductions from that trade or business by $15,000 ($75,000-$60,000 = $15,000). Although Manicurist M received $20,000 in qualified tips, Manicurist M is allowed a qualified tip deduction of only $15,000, which is the extent to which Manicurist M's gross income from the trade or business ($75,000) exceeds the total deductible expenses (other than qualified tips) ($60,000) from that trade or business. (e) Social Security numbers and married individuals--(1) In general. To claim a deduction under section 224, a taxpayer must include on the taxpayer's tax return the Social Security number (SSN), as defined in section 24(h)(7) of the Code, of the individual who has received the qualified tips. (2) Married taxpayers. Taxpayers who are married, as defined by section 7703 of the Code, must file a joint return to claim the deduction allowed by section 224. However, to claim the deduction allowed by section 224, married taxpayers are required to include only the SSN of the taxpayer who has received the tips to claim the deduction, and an SSN is required of both taxpayers only when both have qualified tips for which the deduction is being claimed. In accordance with section 224(b)(1), the total amount of qualified tips that can be deducted per calendar year is $25,000 regardless of filing status. After applying the $25,000 limitation, the deduction amount is further subject to the phase-out based on the taxpayers' modified adjusted gross income described in section 224(b)(2). (3) Example. Taxpayers J and K are married, as defined in section 7703, and they file a joint income tax return. They both work in occupations that customarily and regularly received tips on or before December 31, 2024. J receives $15,000 in qualified tips in 2025, and K receives $20,000 in qualified tips in 2025. The maximum deduction J and K may claim pursuant to section 224 on their joint return for 2025 is $25,000. [[Page 45357]] (f) Occupations that customarily and regularly received tips on or before December 31, 2024--(1) In general. The occupations in Table 1 customarily and regularly received tips on or before December 31, 2024. Subject to the requirements in section 224 and this section, only qualified tips received in connection with the occupations listed in Table 1 are eligible for the deduction in section 224(a). (2) Specified service trade or business exclusion. An individual working in an occupation listed in Table 1 is not eligible for the deduction in section 224(a) with respect to any amounts received in the course of a trade or business that is a specified service trade or business. An individual engaged in the trade or business of being an employee is not eligible for the deduction in section 224(a) with respect to any amounts received for providing services for an employer in the course of a trade or business of the employer that is a specified service trade or business. Table 1 to Paragraph (f)(1)--Occupations That Customarily and Regularly Received Tips on or Before December 31, 2024 ---------------------------------------------------------------------------------------------------------------- Treasury Tipped Related Standard Occupational Occupation Code TTOC occupation TTOC occupation TTOC illustrative Classification (SOC) system (TTOC) title description examples code(s) \1\ ---------------------------------------------------------------------------------------------------------------- Beverage and Food Service ---------------------------------------------------------------------------------------------------------------- 101.............. Bartenders......... Mix and serve Barkeep, 35-3011. drinks to patrons, mixologist, directly or taproom attendant, through waitstaff. sommelier. 102.............. Wait Staff......... Take orders and Cocktail waitress, 35-3031. serve food and dining car server. beverages to patrons at tables in dining establishment. 103.............. Food Servers, Non- Serve food to Room service food 35-3041. restaurant. individuals server, boat hop, outside of a beer cart server. restaurant environment, such as in hotel rooms, residential care facilities, or cars. 104.............. Dining Room and Facilitate food Bar back, bar 35-9011. Cafeteria service. Clean helper, busser. Attendants and tables; remove Bartender Helpers. dirty dishes; replace soiled table linens; set tables; replenish supply of clean linens, silverware, glassware, and dishes; supply service bar with food; and serve items such as water, condiments, and coffee to patrons. 105.............. Chefs and Cooks.... Direct and may Executive chef, 35-1011, 35-2011, participate in the pastry chef, sous 35-2013, 35-2014, preparation, chef, fast food 35-2019. seasoning, and cook, private cooking of salads, chef, restaurant soups, fish, cook, saucier, meats, vegetables, food truck cook, desserts, or other banquet cook, foods. caterer, chocolatier, confectioner. 106.............. Food Preparation Perform a variety Salad maker, 35-1012, 35-2021, Workers. of food sandwich maker, 35-9099. preparation duties fruit and other than vegetable parer, cooking, such as kitchen steward. preparing cold foods and shellfish, slicing meat, and brewing coffee or tea. 107.............. Fast Food and Serve customers at Barista, ice cream 35-3023. Counter Workers. counter or from a server, cafeteria steam table. server. Perform duties such as taking orders and serving food and beverages. May take payment. May prepare food and beverages. 108.............. Dishwashers........ Clean dishes, Dish room worker, 35-9021. kitchen, food silverware cleaner. preparation equipment, or utensils. 109.............. Host Staff, Welcome patrons, Ma[icirc]tre 35-9031. Restaurant, seat them at d'h[ocirc]tel, Lounge, and Coffee tables or in dining room host. Shop. lounge, and help ensure quality of facilities and service. 110.............. Bakers............. Mix and bake Bread baker, cake 51-3011. ingredients to baker, bagel produce breads, baker, pastry rolls, cookies, finisher. cakes, pies, pastries, or other baked goods. ---------------------------------------------------------------------------------------------------------------- Entertainment and Events ---------------------------------------------------------------------------------------------------------------- 201.............. Gambling Dealers... Operate gambling Blackjack dealer, 39-3011, 39-1013, games. Stand or craps dealer, 39-3013. sit behind table poker dealer, and operate games roulette dealer, of chance by pit clerk. dispensing the appropriate number of cards or blocks to players or operating other gambling equipment. Distribute winnings or collect players' money or chips. May compare the house's hand against players' hands. 202.............. Gambling Change Exchange coins, Slot attendant, 41-2012. Persons and Booth tokens, and chips mutuel teller. Cashiers. for patrons' money. May issue payoffs and obtain customer's signature on receipt. May operate a booth in the slot machine area and furnish change persons with money bank at the start of the shift, or count and audit money in drawers. 203.............. Gambling Cage In a gambling Casino cashier, 43-3041. Workers. establishment, cage cashier. conduct financial transactions for patrons. Accept patron's credit application and verify credit references to provide check- cashing authorization or to establish house credit accounts. May reconcile daily summaries of transactions to balance books. May sell gambling chips, tokens, or tickets to patrons, or to other workers for resale to patrons. May convert gambling chips, tokens, or tickets to currency upon patron's request. May use a cash register or computer to record transaction. [[Page 45358]] 204.............. Gambling and Sports Post information Betting runner, 39-3012. Book Writers and enabling patrons bingo worker, keno Runners. to wager on runner, race book various races and writer. sporting events. Assist in the operation of games such as keno and bingo. May operate random number- generating equipment and announce the numbers for patrons. Receive, verify, and record patrons' wagers. Scan and process winning tickets presented by patrons and pay out winnings for those wagers. 205.............. Dancers............ Perform dances..... Club dancer, dance 27-2031. artist. 206.............. Musicians and Play one or more Instrumentalist, 27-2042. Singers. musical accompanist, instruments or lounge singer. sing. 207.............. Disc Jockeys, Play prerecorded Deejay, club DJ.... 27-2091. Except Radio. music for live audiences at venues or events such as clubs, parties, or wedding receptions. May use techniques such as mixing, cutting, or sampling to manipulate recordings. May also perform as emcee (master of ceremonies). 208.............. Entertainers and Entertain audiences Comedian, clown, 27-2099. Performers. with artistic magician, street expression. performer. 209.............. Digital Content Produce and publish Streamer, online 27-2099. Creators. on digital video creator, platforms original social media entertainment and influencer, personality-driven podcaster. content, such as live streams, short-form videos, or podcasts. 210.............. Ushers, Lobby Assist patrons at Ticket collector, 39-3031. Attendants, and entertainment theater usher. Ticket Takers. events by performing duties, such as collecting admission tickets and passes from patrons, assisting in finding seats, searching for lost articles, and helping patrons locate such facilities as restrooms and telephones. 211.............. Locker Room, Provide personal Coat checker, 39-3093. Coatroom, and items to patrons washroom Dressing Room or customers in attendant, Attendants. locker rooms, bathhouse dressing rooms, or attendant. coatrooms. ---------------------------------------------------------------------------------------------------------------- Hospitality and Guest Services ---------------------------------------------------------------------------------------------------------------- 301.............. Baggage Porters and Handle baggage for Hotel baggage 39-6011. Bellhops. travelers at handler, curbside transportation airport check-in terminals or for assistant. guests at hotels or similar establishments. 302.............. Concierges......... Assist patrons at Hotel guest service 39-6012. hotels or agent, activities apartment concierge. buildings with personal services. May take messages; arrange or give advice on transportation, business services, or entertainment; or monitor guest requests for housekeeping and maintenance. 303.............. Hotel, Motel, and Accommodate hotel, Front desk clerk, 43-4081. Resort Desk Clerks. motel, and resort registration clerk. patrons by registering and assigning rooms to guests, issuing room keys or cards, transmitting and receiving messages, keeping records of occupied rooms and guests' accounts, making and confirming reservations, and presenting statements to and collecting payments from departing guests. 304.............. Maids and Perform any Hotel maid, 37-2012. Housekeeping combination of housekeeping staff. Cleaners. light cleaning duties to maintain commercial establishments, such as hotels, in a clean and orderly manner. Duties may include making beds, replenishing linens, cleaning rooms and halls, and vacuuming. ---------------------------------------------------------------------------------------------------------------- Home Services ---------------------------------------------------------------------------------------------------------------- 401.............. Home Maintenance Perform work to Handyman, roofer, 49-9071, 49-9098, and Repair Workers. keep machines, window repairer, 49-9099, 49-9063, mechanical house painter 49-2097, 51-7021. equipment, or the (interior or structure of a exterior), building in flooring repair. May installer, piano maintain and tuner, furniture repair musical restorer, antique instruments, repairer. furniture, antiques, and non- fixtures. 402.............. Home Landscaping Landscape or Lawn mower, 37-3011. and Groundskeeping maintain grounds gardener, tree Workers. of property using trimmer, weed hand or power sprayer. tools or equipment. Workers typically perform a variety of tasks, which may include any combination of the following: sod laying, mowing, trimming, planting, watering, fertilizing, digging, raking, sprinkler installation, and installation of mortarless segmental concrete masonry wall units. 403.............. Home Electricians.. Install, maintain, Electrician........ 47-2111. and repair electrical wiring, equipment, and fixtures. Ensure that work is in accordance with relevant codes. May install or service exterior lights, intercom systems, or electrical control systems. 404.............. Home Plumbers...... Assemble, install, Plumber, 47-2152. alter, and repair pipefitter, pipelines or pipe steamfitter, systems that carry sprinkler water, steam, air, installer. or other liquids or gases. May install heating and cooling equipment and mechanical control systems. [[Page 45359]] 405.............. Home Heating and Install or repair Air conditioning 49-9021. Air Conditioning heating, central repairer, heating Mechanics and air conditioning, system installer, Installers. HVAC, or chimney sweep. refrigeration systems, including oil burners, hot- air furnaces, and heating stoves. 406.............. Home Appliance Repair, adjust, or Washing machine 49-9031. Installers and install all types installer, Repairers. of electric or gas dishwasher household repairer. appliances, such as refrigerators, washers, dryers, and ovens. 407.............. Home Cleaning Perform any House cleaner, pool 37-2012 Service Workers. combination of cleaner, carpet light cleaning cleaner, window duties to maintain washer. private households in a clean and orderly manner. Duties may include making beds, replenishing linens, cleaning rooms and halls, and vacuuming. 408.............. Locksmiths......... Repair and open Safe installer, key 49-9094. locks, make keys, maker. change locks and safe combinations, and install and repair safes. 409.............. Roadside Assistance Provide on-road Tow truck driver, 49-3023, 53-3032. Workers. assistance to car battery drivers whose technician, tire vehicles have repairer, tire broken down. changer, car fuel deliverer. ---------------------------------------------------------------------------------------------------------------- Personal Services ---------------------------------------------------------------------------------------------------------------- 501.............. Personal Care and Provide Elderly companion, 31-1122, 39-9099. Service Workers. personalized personal care assistance to aide, butler, individuals with house sitter, disabilities or personal valet. illness who require help with personal care and activities of daily living support (for example, feeding, bathing, dressing, grooming, toileting, and ambulation). May also provide help with tasks such as preparing meals, doing light housekeeping, and doing laundry. Work is performed in various settings depending on the needs of the care recipient and may include locations such as their home, place of work, out in the community, or at a daytime nonresidential facility. 502.............. Private Event Coordinate Wedding planner, 13-1121, 27-1023. Planners. activities of party planner, staff or clients event florist. to make arrangements for private events. May provide creative design for d[eacute]cor, floral arrangements, and invitations. 503.............. Private Event and Photograph people, Wedding 27-4021. Portrait landscapes, or photographer, Photographers. other subjects. headshot May use lighting photographer. equipment to enhance a subject's appearance. May use editing software to produce finished images and prints. 504.............. Private Event Operate video or Wedding 27-4031. Videographers. film camera to videographer. record images or scenes of private events. 505.............. Event Officiants... Lead and facilitate Wedding officiant, 21-2010. the ceremony for funeral celebrant, life events such clergy, vow as weddings or renewal officiant. funerals. Ceremonies may be religious or civil services. 506.............. Pet Caretakers..... Feed, water, groom, Pet groomer, pet 39-2021. bathe, exercise, sitter, pet or otherwise walker, kennel provide care to worker, pet promote and trainer. maintain the well- being of pets. 507.............. Tutors............. Instruct individual Reading tutor, math 25-3041. students or small tutor, language groups of students tutor. in academic subjects to supplement formal class instruction or to prepare students for standardized or admissions tests. May provide instruction in person or remotely. 508.............. Nannies and Attend to children Au pair, child 39-9011. Babysitters. at businesses and sitter at hotels private and gyms. households. Perform a variety of tasks, such as dressing, feeding, bathing, and overseeing play. ---------------------------------------------------------------------------------------------------------------- Personal Appearance and Wellness ---------------------------------------------------------------------------------------------------------------- 601.............. Skincare Provide skincare Facialist, 39-5094. Specialists. treatments to face electrologist, spa and body to esthetician. enhance an individual's appearance. 602.............. Massage Therapists. Perform therapeutic Masseuse, deep 31-9011. massages of soft tissue massage tissues and therapist, sports joints. May assist massage therapist. in the assessment of range of motion and muscle strength or propose client therapy plans. 603.............. Barbers, Provide beauty or Wig stylist, 39-5012, 39-5011. Hairdressers, barbering beautician, hair Hairstylists, and services, such as colorist, hair Cosmetologists. cutting, coloring, cutter. and styling hair, massaging and treating scalps, trimming beards or giving shaves. 604.............. Shampooers......... Shampoo and rinse Scalp treatment 39-5093. customers' hair. specialist, shampoo assistant. 605.............. Manicurists and Clean and shape Nail technician, 39-5092. Pedicurists. customers' fingernail fingernails and sculptor, nail toenails. May painter. polish or decorate nails. 606.............. Eyebrow Threading Enhance and Eyebrow waxer...... 39-5091. and Waxing maintain clients' Technicians. eyebrows using techniques such as threading, waxing, or tweezing. 607.............. Makeup Artists..... Design and apply Wedding makeup 39-9031. makeup looks. artist, party makeup artist. 608.............. Exercise Trainers Instruct or coach Aerobics trainer, 27-1019. and Group Fitness groups or yoga instructor, Instructors. individuals in personal trainer. exercise activities for the primary purpose of personal fitness. Demonstrate techniques and form, observe participants, and explain to them corrective measures necessary to improve their skills. Develop and implement individualized approaches to exercise. [[Page 45360]] 609.............. Tattoo Artists and Design and execute Tattoo artist, ear 51-6052. Piercers. tattoos on a piercer, nose client's skin, piercer. often using a needle and ink. Create openings in the human body for the insertion of jewelry. May consult clients on aftercare to promote healing and prevent infection. 610.............. Tailors............ Design, make, Tailor, seamstress, 51-6041. alter, repair, or clothing fit garments. alterations worker. 611.............. Shoe and Leather Construct, Cobbler, shoe 39-5012. Workers and decorate, or shiner. Repairers. repair leather and leather-like products, such as luggage, shoes, and saddles. May use hand tools. ---------------------------------------------------------------------------------------------------------------- Recreation and Instruction ---------------------------------------------------------------------------------------------------------------- 701.............. Golf Caddies....... Assist a golfer Golf caddie, golf 39-3091. during a round of cart attendant. golf by providing practical support and strategic advice. May carry the golfer's bag, manage their clubs, offer guidance on club selection or course strategy. 702.............. Self-Enrichment Teach or instruct Knitting 25-3021. Teachers. individuals or instructor, piano groups for the teacher, art primary purpose of instructor, dance self-enrichment, teacher. rather than for an occupational objective, educational attainment, competition, or fitness. 703.............. Recreational and Pilot and navigate Helicopter tour 25-3021. Tour Pilots. the flight of pilot, hot air fixed-wing balloon aeronaut, aircraft, skydiving pilot. helicopters, or other airborne vehicle for recreational or touring purposes. Excludes regional national, and international airline pilots, and emergency services pilots. 704.............. Tour Guides........ Guide individuals Museum guide, 39-7011. or groups on sightseeing guide. sightseeing tours or through places of interest, such as industrial establishments, public buildings, and art galleries. 705.............. Travel Guides...... Plan, organize, and Cruise director, 39-7012. conduct long- river expedition distance travel, guide. tours, and expeditions for individuals and groups. 706.............. Sports and Teach or instruct Diving instructor, 53-2012. Recreation individuals or ski instructor, Instructors. groups for the tennis teacher, primary purpose of surfing instructor. recreation, rather than for an occupational objective, educational attainment, competition, or fitness. ---------------------------------------------------------------------------------------------------------------- Transportation and Delivery ---------------------------------------------------------------------------------------------------------------- 801.............. Parking and Valet Park vehicles or Parking garage 53-6021. Attendants. issue tickets for attendant, valet customers in a parker. parking lot or garage. May park or tend vehicles in environments such as a hotel or restaurant. May collect fee. 802.............. Taxi and Rideshare Drive a motor Cab driver, 53-3054. Drivers and vehicle to personal driver. Chauffeurs. transport passengers on a planned or unplanned basis. 803.............. Shuttle Drivers.... Drive a motor Airport shuttle 53-3053. vehicle to driver, hotel transport shuttle driver, passengers on a rental car shuttle planned route and driver. scheduled basis. May collect a fare. Excludes taxi and rideshare drivers, chauffeurs, municipal bus drivers, and school bus drivers. 804.............. Goods Delivery Drive truck or Pizza delivery 53-3031. People. other vehicle over driver, grocery established routes delivery driver, or within an floral delivery, established bicycle courier, territory to package delivery deliver goods, person, appliance such as food delivery driver, products, furniture delivery appliances, or person. furniture, or pick up or deliver packages. May also take orders or collect payment at point of delivery. 805.............. Personal Vehicle Wash or otherwise Car wash attendant, 53-7061. and Equipment clean personal auto detailer, Cleaners. vehicles, boat waxer. machinery, and other equipment. Use such materials as water, cleaning agents, brushes, cloths, and hoses. 806.............. Private and Charter Drive bus or motor Motor coach bus 53-3052. Bus Drivers. coach for charters driver, tour bus or private driver. carriage. May assist passengers with baggage. 807.............. Water Taxi Operate water taxi Water taxi captain, 53-5022. Operators and boats or provide air boat operator, Charter Boat services to charter boat Workers. passengers on deckhand, charter private charter boat steward. boats. May assist in navigational activities. 808.............. Rickshaw, Pedicab, Operate rickshaw, Horse drawn 53-6099. and Carriage pedicab, or carriage driver, Drivers. carriage to bike taxi driver. transport passengers. 809.............. Home Movers........ Manually move Furniture mover, 53-7062. furniture, music packer, piano instruments, art, mover, art mover. antiques, boxes, luggage, or other materials to or from a home or dwelling. ---------------------------------------------------------------------------------------------------------------- \1\ ``Related Standard Occupational Classification (SOC) System Code(s)'' are the code(s) from the 2018 Standard Occupational Classification System, as published by the Executive Office of the President, Office of Management and Budget, that most closely correlate(s) to the Treasury Tipped Occupation Code (TTOC). [[Page 45361]] (g) Termination. No deduction shall be allowed under this section for any taxable year beginning after December 31, 2028. (h) Applicability date. This section applies to taxable years beginning after December 31, 2024. Edward T. Killen, Acting Chief Tax Compliance Officer. [FR Doc. 2025-18278 Filed 9-19-25; 8:45 am] BILLING CODE 4830-01-P