[Federal Register Volume 91, Number 70 (Monday, April 13, 2026)]
[Rules and Regulations]
[Pages 19026-19056]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2026-07104]
[[Page 19025]]
Vol. 91
Monday,
No. 70
April 13, 2026
Part III
Internal Revenue Service
-----------------------------------------------------------------------
26 CFR Part 1
Occupations That Customarily and Regularly Received Tips; Definition of
Qualified Tips; Final Rule
Federal Register / Vol. 91 , No. 70 / Monday, April 13, 2026 / Rules
and Regulations
[[Page 19026]]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 10044]
RIN 1545-BR63
Occupations That Customarily and Regularly Received Tips;
Definition of Qualified Tips
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This document contains final 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
regulations affect individuals who receive tips as part of their
occupation.
DATES:
Effective date: These final regulations are effective on June 12,
2026.
Applicability date: For date of applicability, see Sec. 1.224-
1(i).
FOR FURTHER INFORMATION CONTACT: Stephanie Caden or Andrew Holubeck at
(202) 317-4774.
SUPPLEMENTARY INFORMATION:
Authority
These final regulations contain amendments 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. These final
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 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. The final 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
This document contains amendments to 26 CFR part 1 under section
224 of the Code relating to the deduction from income for qualified
tips.
Under section 61(a) of the Code, 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) of the Code defines taxable income for taxpayers who
itemize their deductions 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) of the Code, or are reported by the
taxpayer on Form 4137, Social Security and Medicare Tax on Unreported
Tip Income (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 of the Code. 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 are received in the course of a trade or
business that is a specified service 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.
[[Page 19027]]
Section 224(d)(3) provides that for purposes of section 224(d)(1),
the term ``cash tips'' includes 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.
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 of the Code), 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, (``List of Occupations that Receive Tips'')
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 Beautiful 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.
A notice of proposed rulemaking and a notice of public hearing
(REG-110032-25) were published in the Federal Register (90 FR 45340) on
September 22, 2025, proposing regulations under section 224 that
identify occupations that customarily and regularly received tips on or
before December 31, 2024, and that provide a definition of ``qualified
tips'' for purposes of the income tax deduction for qualified tips
under section 224. A public hearing was held telephonically on October
23, 2025, and comments responding to the notice of proposed rulemaking
were received.
On November 5, 2025, the Treasury Department and the IRS released
Notice 2025-62, providing penalty relief for certain 2025 information
reporting related to the section 224 deduction for qualified tips. In
addition, Notice 2025-69, released on November 21, 2025, provides
guidance regarding how individuals satisfy the requirements for the
section 224 deduction for qualified tips received in 2025. Notice 2025-
69 also provides transition relief for taxpayers regarding the
requirement that qualified tips must not be received in the course of a
specified service trade or business.
Summary of Comments and Explanation of Revisions
This Summary of Comments and Explanation of Revisions summarizes
the proposed regulations, all the substantive comments submitted in
response to the proposed regulations, and revisions adopted by these
final regulations. The Treasury Department and the IRS received 322
written comments in response to the proposed regulations. The comments
are available for public inspection at https://www.regulations.gov or
upon request. After full consideration of the comments received, these
final regulations adopt the proposed regulations with modifications in
response to such comments as described in this Summary of Comments and
Explanation of Revisions.
Many of the comments received were unrelated to tax law or
otherwise outside the scope of the proposed regulations. Comments
expressing general approval or disapproval of section 224 or the OBBBA,
recommending statutory revisions, and addressing issues that are
outside the scope of this rulemaking (such as comments relating to IRS
forms, reporting procedures, and enforcement) are generally not
addressed in this Summary of Comments and Explanation of Revisions
section or adopted in these final regulations. Guidance on claiming the
deduction for 2025 was provided in Notice 2025-69, and additional
guidance on information reporting and claiming the deduction in
subsequent years will also be provided in the instructions to the
relevant forms.
Some commenters requested a public hearing or requested to speak at
the public hearing, which was held telephonically on October 23, 2025.
Other commenters requested that the comment period be extended for at
least another 30 days. To ensure that these final regulations are
issued in time to provide guidance to taxpayers filing their 2025
income tax returns, the Treasury Department and the IRS did not extend
the comment period, and the comment period for the proposed regulations
ended on October 22, 2025; however, the Treasury Department and the IRS
considered all comments received, including comments submitted after
the close of the comment period that were received up to the point in
the rulemaking process at which revisions to the regulatory text could
no longer practicably be made. Comments received after that point could
not be fully evaluated or incorporated due to the advanced stage of the
drafting process. In addition to making modifications in response to
the comments received, the final regulations also include non-
substantive grammatical or stylistic changes to the proposed
regulations.
1. Comments on the Methodology Used To Construct the List of
Occupations That Receive Tips
Table 1 in Sec. 1.224-1(f) of the proposed regulations contains
the proposed list of occupations that customarily and regularly
received tips (List of Occupations that Receive Tips) on or before
December 31, 2024, that section 70201(h) of the OBBBA instructed the
Secretary to provide. The Treasury Department and the IRS compiled the
proposed List of Occupations that Receive 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,'' the Treasury
Department and the IRS looked to dictionary definitions and other
statutory provisions, including the provisions of the Fair Labor
Standards Act (FLSA), for guidance.
With these parameters in mind, the Treasury Department and the IRS
reviewed data collected from 2023 Forms W-2, Wage and Tax Statement,\3\
that reported tips in box 7 on the form (Social Security tips); Forms
4137 that reported tips on line 4; and
[[Page 19028]]
corresponding income tax returns (Forms 1040). The Treasury Department
and the IRS identified occupations listed on the income tax returns (as
reported on page 2 of Form 1040 next to the taxpayer's signature)
described in the prior sentence as having customarily and regularly
received tips based on the percentage of taxpayers who reported at
least $100 in annual tip income within a given occupation as reported
on Form 1040.
---------------------------------------------------------------------------
\3\ 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 reviewed preliminary data
for the 2024 tax year and anticipated that final 2024 data would be
substantially similar to 2023 data.
---------------------------------------------------------------------------
To account for limitations in this data, including the fact that
the data pool consisted only of individuals working as employees and
relied on self-reported and non-standardized occupation descriptions,
the Treasury Department and the IRS also evaluated occupations
identified in the Gaming Industry Tip Compliance Agreement (GITCA)
program, a voluntary tip reporting program for the gaming industry run
by the IRS, and other similar IRS tip reporting programs. 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. Finally, the Treasury
Department and the IRS analyzed survey data from the Panel Study of
Income Dynamics (PSID) that included information on occupations and tip
income of both employees and self-employed individuals. The PSID is a
nationally representative survey conducted by the University of
Michigan.
In organizing the proposed List of Occupations that Receive Tips,
the Treasury Department and the IRS created a new categorization system
based on the 2018 Standard Occupation Classification (SOC Code) system,
called the Treasury Tipped Occupation Code (TTOC) system. The SOC Code
system is a Federal statistical standard used by Federal agencies to
classify workers into occupational categories for the purpose of
collecting, calculating, or disseminating data. It is published by the
Executive Office of the President, Office of Management and Budget
(OMB).
Many commenters addressed the methodology used to create the
proposed List of Occupations that Receive Tips. One commenter suggested
that the IRS review public comments submitted in response to the Bureau
of Labor Statistics' Notice of solicitation of comments to revise the
SOC for 2028 (BLS-2024-0001), published in the Federal Register on June
12, 2024 (89 FR 49911), when considering other occupations to add to
the list. Another commenter suggested that the primary source used to
create the list, occupations reported on an income tax return, does not
reflect any historical or traditional information about tipped
occupations. One commenter noted that many of the occupations on the
list, especially those that do not have regular interaction with the
public like cooks, dishwashers, and prep cooks, are not historically
known to receive tips.
One commenter suggested that the Treasury Department and the IRS
narrow the list by focusing on the frequency or prevalence of tip
income. The commenter noted that the definitions of customarily and
regularly discussed in the proposed regulations were a ``logical
starting point,'' but questioned whether these definitions were applied
in the methodology beyond excluding workers reporting less than $100 in
tips per year. The commenter questioned why a $100 annual threshold was
selected instead of a $30/month threshold, which is used in the FLSA
context. One commenter argued that the proposed standard of ``more
often than occasionally'' conflicted with the $100 annual threshold.
Several commenters noted that the proposed regulations do not explain
how the additional sources, outside of income tax returns, were used to
add occupations to the list and that the addition of certain
occupations is not supported by data. Two commenters requested more
transparency as to how the list was created, including providing
transparent categorization standards, written job descriptions, and
stated evidence thresholds for inclusion.
Finally, a few commenters noted that eligibility in a particular
occupation should be based on the nature and substance of the services
provided in the occupation, rather than the context or industry in
which they are provided and that the list should be revised to focus
more on the nature of occupations rather than on the industry or type
of service or product provided.
One commenter stated that the occupations designated by the
Treasury Department and the IRS as eligible for no taxes on tips
appropriately captured traditional tipped occupations and requested
that none of these occupations be cut from the final rule. Another
commenter noted that the proposed List of Occupations that Receive Tips
accurately reflects those intended by Congress to receive the tax
deduction.
Section 70201(h) of the OBBBA requires the Treasury Department and
the IRS to publish a list of occupations that customarily and regularly
received tips on or before December 31, 2024. This provision did not
dictate a specific process for creating this list. In constructing a
methodology for creating the proposed List of Occupations that Receive
Tips, the Treasury Department and the IRS used traditional tools of
statutory construction, including dictionary definitions, to clarify
what it means for an occupation to customarily and regularly receive
tips. In compiling the proposed list, the Treasury Department and the
IRS needed a source of occupational data from which to select those
occupations that customarily and regularly received tips on or before
December 31, 2024, to avoid relying solely on anecdotal information.
The Treasury Department and the IRS utilized the best comprehensive
data source available to them--occupations reported on 2023 Federal
income tax returns,\4\ the latest tax year for which complete
information was available at the time the proposed regulations were
published. The many different occupations that taxpayers identified on
the ``Your occupation'' line on their income tax returns were analyzed
based on the SOC Code associated with the occupation. The SOC Codes
associated with income tax returns with accompanying 2023 Forms W-2,
Wage and Tax Statement, and Forms 4137, Social Security and Medicare
Tax on Unreported Tip Income, reporting more than $100 per year in tip
income were identified and compiled into a preliminary list. For every
SOC Code on this list, data on reported tips, including the percentage
of individuals within that SOC Code who reported tips (on associated
Forms W-2 and 4137), was determined. Thus, occupational data from
income tax returns was calculated with respect to the related SOC Code,
not necessarily for the occupation listed on the individual income tax
return. Next, the Treasury Department and the IRS created the TTOC
system for organizing the proposed List of Occupations that Receive
Tips. This process sometimes involved combining or dividing certain SOC
Codes to describe the occupations in a user-friendly manner and to
remove non-tipped occupations that were included under the same SOC
Code as tipped occupations. The proposed regulations identified some
occupations as distinct categories, while other occupations were
embedded in broader categories (for example, eyelash technicians, as
discussed later, were included implicitly under TTOC 603
[[Page 19029]]
Barbers, Hairdressers, Hairstylists, or Cosmetologists or TTOC 606
Eyebrow Technicians).
---------------------------------------------------------------------------
\4\ The Treasury Department and the IRS reviewed preliminary
data for the 2024 tax year and anticipated that final 2024 data
would be substantially similar to 2023 data.
---------------------------------------------------------------------------
As explained in the preamble to the proposed regulations and noted
earlier, the proposed List of Occupations that Receive Tips and its
related data on reported tips had limitations. Tipped occupations with
a large proportion of individuals working in those occupations as
independent contractors may have been underrepresented in the list,
since the list only included employees reporting tips.\5\ In addition,
in certain cases, tipped occupations were grouped in the same SOC Code
as non-tipped occupations, resulting in a lower percentage of
individuals reporting tips for that SOC Code than for the occupation
within the SOC Code that was the tipped occupation.
---------------------------------------------------------------------------
\5\ Only employees receive Forms W-2, which include separate tip
reporting. Similarly, only employees report their tips using Form
4137. Independent contractors do not separately report tips on their
income tax returns, and the information returns received by
independent contractors prior to 2026, such as Forms 1099-MISC, did
not separately report tips. Thus, no tax return information was
available concerning tips received by independent contractors.
Beginning in tax year 2026, information returns furnished to both
independent contractors and employees will separately report certain
tips.
---------------------------------------------------------------------------
As described earlier, other information sources, including
occupations identified in the GITCA program, the House Budget Committee
report on the OBBBA, and the PSID, were consulted to help address some
of the limitations of the list. However, many of these sources were not
exhaustive lists of tipped occupations and others were based on data
not as comprehensive and statistically significant as income tax return
data.
While the data and information the Treasury Department and the IRS
used to develop the proposed List of Occupations that Receive Tips had
limitations, it was and continues to be the best data available for
this purpose. When compiling the List of Occupations that Receive Tips
in the proposed and final regulations, the Treasury Department and the
IRS reviewed preliminary data available for tax year 2024. This
preliminary data was updated between the issuance of the proposed
regulations and these final regulations, but in both cases it is
substantially similar to the tax year 2023 data and did not alter the
list. None of the commenters provided alternatives for reliable data
sources, nor did they provide alternative methodologies for
constructing the List of Occupations that Receive Tips. For these
reasons, the Treasury Department and the IRS used the same methodology
and data from the proposed regulations (including updated preliminary
2024 tax return information) to develop the List of Occupations that
Receive Tips in the final regulations.
In response to the comments received regarding occupations not
specifically identified in the proposed list, the Treasury Department
and the IRS reviewed the same available data at both the SOC Code level
and the more granular level of the occupations listed on individual
income tax returns.\6\ Where the data supported a modification to the
list, the Treasury Department and the IRS expanded or refined the list
of occupations in the final regulations to more accurately identify
occupations that customarily and regularly received tips on or before
December 31, 2024. The specific comments requesting additional
occupations and the changes made in response are described later in
this preamble.
---------------------------------------------------------------------------
\6\ The Treasury Department and the IRS reviewed the data at the
more granular level of occupations listed on individual income tax
returns to verify that the SOC Code grouping did not exclude
occupations based on inaccurate data.
---------------------------------------------------------------------------
Concerning comments asking that the occupations on the List of
Occupations that Receive Tips be based on the nature and substance of
the services provided in the occupation rather than the context or
industry in which they are provided, generally the names and
descriptions of the occupations on the List of Occupations that Receive
Tips are based on the nature of the service provided in that
occupation. The groupings of the various occupations under industry-
related headings like ``Beverage and Food Service'' is solely for
purposes of organizing the list. However, in a few situations the
industry context in which an occupation operates changes the nature of
the occupation in comparison to other industrial contexts to such an
extent that it becomes a separate occupation. For instance, ``desk
clerks'' in the hospitality industry provide a range of very specific
services to hotel, motel, and resort guests such that it is a distinct
occupation from desk clerks in other industry contexts.
Some commenters expressed concern that several of the occupations
on the list are not considered occupations in which employees
``customarily and regularly'' receive tips under the FLSA. These
commenters were concerned that the inconsistencies might cause
confusion. One commenter asked for more clarification as to how the
List of Occupations that Receive Tips interacts with FLSA rules.
As the Treasury Department and IRS explained in the preamble to the
proposed regulations, the 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\ The
[[Page 19030]]
occupations DOL has identified as occupations in which employees
customarily and regularly receive tips in its guidance are not meant to
be exhaustive and do not control for purposes of section 224 of the
Code.
---------------------------------------------------------------------------
\7\ See 90 FR at 45344. Under the FLSA, so long as certain
criteria are satisfied, employers can take a tip credit to bring a
tipped employee's total wages up to the Federal minimum wage amount.
See 29 U.S.C. 203(m)(2)(A)(i)-(ii). Currently, the federal minimum
wage is $7.25 per hour, and the maximum tip credit amount is $5.12.
\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
December 18, 2025, from https://www.dol.gov/agencies/whd/field-operations-handbook; see also WHD Opinion Letter FLSA2025-03 (Sept.
30, 2025); 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).
---------------------------------------------------------------------------
There are many differences between the specific language, purpose,
and history of the FLSA tip provisions versus the language, purpose,
and history of the deduction for qualified tips under section 224 of
the Code. Among other things, while the text of the FLSA is expressly
limited to occupations in which an employee receives ``more than $30 a
month in tips,'' section 224 contains no such limitation, and the
Treasury Department and IRS have not utilized this threshold for
purposes of limiting the List of Occupations that Receive Tips.
In addition, while the FLSA contemplates that an employee must have
some level of customer interaction to ``customarily and regularly''
receive tips,\11\ section 224(d)(3) provides that for purposes of the
deduction for qualified tips under section 224, cash tips include, in
the case of an employee, tips received through a tip sharing
arrangement. Accordingly, the Treasury Department and IRS included in
the proposed List of Occupations that Receive Tips some occupations
that may not have extensive, or any, customer interaction, and in which
employees have not been considered to customarily and regularly receive
tips under the FLSA, including dishwashers and cooks. The final
regulations take the same approach.
---------------------------------------------------------------------------
\11\ See Montano v. Montrose Rest. Assocs., 800 F.3d 186, 189-
194 (5th Cir. 2015) (holding that a factfinder could determine that
an employee did not ``customarily and regularly receive tips,''
despite the fact that the employer included him in a tip pool).
---------------------------------------------------------------------------
In addition to the differences discussed above, section 224 and the
FLSA serve different purposes. The purpose of section 224 is to provide
a deduction for individuals who receive tips, while the FLSA, in
relevant part, governs the conditions under which employers may take a
credit towards their wage obligations for employees who receive tips.
Given that section 224 of the Code and the FLSA tip provisions are
entirely different statutory provisions with different histories and
purposes, the inclusion of occupations as tipped occupations under
section 224 has no bearing or effect on what occupations are considered
tipped for purposes of the FLSA and any differences should not be a
source of confusion.
Commenters also asked how the IRS will determine whether a
particular taxpayer's occupation is on the List of Occupations that
Receive Tips in the regulations when it is not listed as an
illustrative example. One commenter asked that the IRS provide
transparency as to how the IRS intends to interpret whether an
occupation is on the List of Occupations that Receive Tips. Taxpayers
wishing to claim the deduction and entities responsible for information
reporting are primarily responsible for ensuring their occupation is on
the List of Occupations that Receive Tips. The list, in most instances,
is sufficiently specific to provide clarity. The IRS intends to
interpret the occupations on the list in a fair and impartial manner
consistent with their commonly understood meaning.
Several commenters asked that the List of Occupations that Receive
Tips be a non-exhaustive one (one commenter stating that an exclusive
list was not supported by statute). One commenter suggested instituting
a safe harbor provision for claiming deductions for non-listed
occupations and setting up a semi-annual review process for adding new
occupations to the list. Another commenter suggested listing the
occupations in a revenue procedure and updating the revenue procedure
with additional occupations based on more current data, if necessary.
Because section 224(d)(1) provides that ``[t]he term 'qualified
tips' means cash tips received by an individual in an occupation which
customarily and regularly received tips on or before December 31, 2024,
as provided by the Secretary,'' only tips received in an occupation
that is on the List of Occupations that Receive Tips ``provided by the
Secretary'' are qualified tips. In addition, the statutory language
does not contemplate an evolving or updated List of Occupations that
Receive Tips but rather describes one list of occupations that
customarily and regularly received tips at a specific point in time--on
or before December 31, 2024. Through the notice of proposed rulemaking
notice and comment process, interested parties were provided the
opportunity to suggest additions and other edits to the List of
Occupations that Receive Tips in the proposed regulations. As discussed
later, the Treasury Department and the IRS made several revisions in
response to the comments. However, the statute requires that the
Secretary provide a comprehensive list as of a fixed point in time. For
this reason, the final regulations contain the requirement from the
proposed regulations that only qualified tips received in connection
with the occupations on the List of Occupations that Receive Tips are
eligible for the deduction in section 224(a). However, note that while
the List of Occupations that Receive Tips is exhaustive, the
illustrative examples of occupations that fit within each TTOC are not.
There may be other occupations that fall within a TTOC that are not
listed as an illustrative example.
2. Comments Concerning the List of Occupations That Receive Tips
Several commenters indicated their support for specific occupations
included on the proposed List of Occupations that Receive Tips,
including occupations in the beauty industry, app-based delivery
drivers, and digital content creators. Many commenters requested that
additional occupations be added to the List of Occupations that Receive
Tips. Several of the requested additions were for occupations that were
already included in the proposed List of Occupations that Receive Tips,
either as their own category or specifically mentioned as an
illustrative example in an existing category, such as pet groomers,
digital content creators, dancers, boat workers, pool cleaners and yoga
instructors. Those occupations remain on the final list.
A. Comments Requesting Additional Details or Clarification for
Occupations Already on the List of Occupations That Receive Tips
Some commenters requested that additional occupations be included
as illustrative examples in the categories in which they belong. The
illustrative examples were provided to assist taxpayers, but they are
not an exhaustive list of every occupation that fits under a TTOC
occupation category. For example, under the TTOC for Travel Guides
(705), cruise director and river expedition guide are listed as
illustrative examples. But other travel guides, such as a hiking guide
or urban ghost tour guide, would also be included in this TTOC, even
though they are not listed as illustrative examples.
One commenter asked about including ``table game supervisors'' in
casinos on the List of Occupations that Receive Tips. The SOC Code for
``First-Line Supervisors of Gambling Service Workers'' (39-1013), whose
duties can include planning and organizing activities and services for
guests in hotels and casinos, was included in the proposed List of
Occupations that
[[Page 19031]]
Receive Tips under TTOC 201, Gambling Dealers, and continues to be
included under this category in the final regulations. Thus, table game
supervisors are covered by the Gambling Dealers category.
One commenter requested that residential building staff, such as
doormen, be added to the list. Most residential building staff are
covered by the categories in the proposed List of Occupations that
Receive Tips. For example, if a residential building has a concierge,
they are already included in the ``Concierges'' category (TTOC 302).
Residential building maintenance workers fit under the ``Home
Maintenance and Repair Workers'' (TTOC 401). And finally, doormen fit
as part of the ``Baggage Porters and Bellhops'' (TTOC 301). However, to
clarify that this category can include workers who do not work in a
hotel or motel, ``doorman'' has been added to the list of illustrative
examples for this category in the final regulations.
Another commenter asked that eyelash technicians be added to the
List of Occupations that Receive Tips. The proposed List of Occupations
that Receive Tips included ``Eyebrow Threading and Waxing Technicians''
(TTOC 606). For clarity, in the final regulations this category is
revised to read ``Eyebrow and Eyelash Technicians,'' and additions were
made to the description to include eyelash technicians.
One commenter asked that a winery tasting room server be added to
the List of Occupations that Receive Tips. The proposed List of
Occupations that Receive Tips included ``Food Servers, Non-restaurant''
(TTOC 103), and a winery tasting room server is covered by this
category. The final regulations clarify this by amending the category
name to ``Food and Beverage Servers, Non-restaurant'' (newly added
language shown in italics).
One commenter asked that the phrase ``over established routes or
within an established territory'' be removed from the description of
``Goods Delivery People'' (TTOC 804) to clarify that app-based delivery
workers (also called gig economy delivery drivers) are covered by that
category. The proposed illustrative examples focused on the service
being performed (e.g., pizza delivery, package delivery) rather than
the method through which the service was requested. The Treasury
Department and the IRS agree that adding ``app/platform based delivery
person'' to the illustrative list would be helpful. The final
regulations include this clarification in both ``Goods Delivery
People'' (TTOC 804) and ``Taxi and Rideshare Drivers and Chauffeurs''
(TTOC 802). In addition, the phrase ``over established routes or within
an established territory'' has been removed from the description of
``Goods Delivery People'' in the final regulations.
One commenter asked that more detail be provided for the various
occupations in the ``Recreation and Instruction'' grouping to encompass
the full range of outdoor recreation guiding and instructional
activities, and more specifically that ``Tour Guides'' and ``Travel
Guides'' expressly include outdoor, wilderness, and expedition guiding
services. Although outdoor recreation occupations are addressed in
``Travel Guides'' (TTOC 705) (river expedition guide is listed as an
illustrative example), the Treasury Department and the IRS agree that
additional detail would be helpful, and the final regulations include a
parenthetical noting that both indoor and outdoor locations are
covered.
Another commenter requested that banquet wait staff be added to the
List of Occupations that Receive Tips. The proposed regulations
included the ``Wait Staff'' (TTOC 102) category. The Treasury
Department and the IRS agree that additional detail would be helpful to
confirm that banquet wait staff are covered by this category. The final
regulations add ``banquet staff'' as an illustrative example, and the
description is amended to read, ``Take orders and serve food and
beverages to patrons in dining establishments or at catered events''
(newly added language shown in italics).
One commenter asked whether people who dress as Santa Claus for
parties are in an occupation that customarily and regularly received
tips on or before December 31, 2024. Individuals dressed up as Santa
Claus, as well as other characters or celebrities, are covered by the
``Entertainers and Performers'' (TTOC 208) category.
Another commenter asked that self-enrichment and self-improvement
instructors, such as intuition coaches, energy practitioners (including
Reiki and Energy Psychology practitioners), and meditation instructors
be included on the List of Occupations that Receive Tips. Although
these specific occupations were not identified in the proposed
regulations, depending on the nature of the instruction provided and
the facts and circumstances of each particular situation, these
instructors could be covered under ``Self-Enrichment Teachers'' (TTOC
702), if their instruction is for the primary purpose of self-
enrichment, rather than for an occupational objective, educational
attainment, competition; or fitness; ``Sports and Recreation
Instructors'' (TTOC 706), if they are teaching or instructing
individuals or groups for the primary purpose of recreation, rather
than for an occupational objective, educational attainment,
competition, or fitness; or ``Exercise Trainers and Group Fitness
Instructors'' (TTOC 608), if they are instructing or coaching groups or
individuals in exercise activities for the primary purpose of personal
fitness.
One commenter requested that senior living and resident care
service providers be included in the List of Occupations that Receive
Tips. The proposed regulations would have included the category of
``Personal Care and Service Workers'' (TTOC 501). To clarify that
resident care is also included in this occupation category, the
description in the final regulations provides that ``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, at a daytime nonresidential facility or a residential
facility'' (newly added language shown in italics).
Another commenter asked that the illustrative examples name all
beauty-sector occupations including estheticians and apprentices and
assistants. As discussed previously, the illustrative examples are a
non-exhaustive list of occupations. In addition, the final regulations
clarify that apprentices and assistants qualify under the applicable
TTOC occupation category if they perform the same services as those
listed in the TTOC occupation description.
Finally, a commenter noted that the proposed category of ``Pet
Caretaker'' (TTOC 506) would exclude individuals who provide care to
horses because horses are considered livestock in certain legal
contexts. This commenter stated that certain tasks involved in the care
of horses, including grooming and exercising, are similar to the tasks
included in the description of pet caretakers. In response to this
comment, the final regulations include the category of ``Pet and Show
Animal Caretaker'' (TTOC 506). In addition, ``horse groomer'' has been
added to the list of illustrative examples for this occupation
category.
B. Comments Suggesting New Occupations Be Added to the List of
Occupations That Receive Tips
In evaluating comments suggesting new occupations for inclusion on
the List of Occupations that Receive Tips, the Treasury Department and
the IRS consulted the same data sources as in
[[Page 19032]]
preparing the proposed List of Occupations that Receive Tips in the
proposed regulations (the 2023 income tax return data, the preliminary
data available for tax year 2024, IRS voluntary tip reporting program
data, legislative history and survey data regarding tipped
occupations), as well as the updated preliminary data available for tax
year 2024. The Treasury Department and the IRS examined the data for
the suggested new occupations at the more granular level of the
occupations listed on individual income tax returns, in addition to
looking at the SOC Codes of the suggested new occupations. This
examination of the data is the basis for responding to the following
comments.\12\
---------------------------------------------------------------------------
\12\ Given the wide variation of terms used to characterize
occupations on income tax returns, it was not feasible to examine
every occupation in this way. For this reason, this examination was
conducted only for occupations that commenters suggested were
missing from the list of tipped occupations in the proposed
regulations.
---------------------------------------------------------------------------
One commenter requested that ``florists'' be included on the List
of Occupations that Receive Tips. The proposed regulations would have
included event florist as an illustrative example of ``Private Event
Planners'' (TTOC 502), and the SOC Code for Floral Designers, 27-1023,
would have been included as one of the related SOC Code for TTOC 502.
Similarly, the proposed regulations would have included floral delivery
persons as an illustrative example of ``Goods Delivery People'' (TTOC
804). In response to this comment, the Treasury Department and the IRS
reviewed the available data again, this time examining the data for
occupations listed on individual income tax returns that were related
to florists, in addition to looking at data for florist-related SOC
Codes. The Treasury Department and the IRS determined that the data for
florist-related occupations listed on individual income tax returns
supports adding a new TTOC for ``Floral Designers'' (TTOC 510), which
encompasses a wider variety of floral workers. ``Event florist'' was
removed as an illustrative example from ``Private Event Planners'' and
added to the new ``Floral Designers'' category, and the related SOC
Code, 27-1023, was also moved from ``Private Event Planner'' to the new
``Floral Designers'' category.
Another commenter asked that artists and artisans be added to the
List of Occupations that Receive Tips. The proposed regulations did not
separately identify artists as an occupation that customarily and
regularly received tips on or before December 31, 2024. However,
individuals who may be described as artists appeared in multiple
occupation classifications, and the proposed regulations would have
included certain performing artists on the List of Occupations that
Receive Tips. For example, both dancers and musicians would have been
included (TTOC 205 and 206). In response to this comment, the Treasury
Department and the IRS reviewed the same data sources described in the
proposed regulations, examining the data for occupations listed on
individual income tax returns that were related to artists, distinct
from occupations such as dancers and musicians, in addition to looking
at data for artist-related SOC Codes. The Treasury Department and the
IRS determined that the data for artist-related occupations listed on
individual income tax returns supports the conclusion that a visual
artist is also an occupation that customarily and regularly received
tips on or before December 31, 2024. The final regulations include the
new category of ``Visual Artists (TTOC 509)'' This category includes
individuals who create original visual artwork using any of a wide
variety of media and techniques. Examples of this category include ice
sculptor and caricature sketch artist. Tip-related income tax return
data for the occupation ``artisan'' did not support adding this
occupation category as a separate TTOC. However, the terms ``artist''
and ``artisan'' are similar in meaning and it is possible that many
individuals who perform services as an artisan might also be considered
as performing services as an artist, depending on the particular facts
and circumstances.
One commenter suggested that gas station attendants who pump gas
for customers where they are required to do so by State law should be
included on the List of Occupations that Receive Tips. The Treasury
Department and the IRS reviewed tip-related income tax return data for
gas pump attendants located in New Jersey and Oregon, the two States
that currently prohibit customers from pumping their own gas.\13\ This
data showed that gas pump attendants in States where full-service gas
pumping is mandated customarily and regularly received tips on or
before December 31, 2024. Based on this data, the final regulations
include a new TTOC for ``Gas Pump Attendants,'' which applies to all
individuals who pump gas for customers at a gas station and may also
clean the windshield, check the oil level, or check the tire pressure
of the customer's car in conjunction with the car being refueled.
---------------------------------------------------------------------------
\13\ Under 2023 Oregon House Bill No. 2426, signed into law on
August 4, 2023, the state of Oregon now allows self-service in
certain situations, but certain gas stations in the State are still
required to provide full service for at least half of the gas pumps
at the station. 2023 Oregon House Bill No. 2426, Oregon Eighty-
Second Legislative Assembly.
---------------------------------------------------------------------------
Commenters suggested that chiropractors, accountants, tax
preparers, clergy members, concert merchandise sellers, and ``low
bono'' legal service providers (legal professionals who provide legal
services to clients on a sliding scale based on income) be added to the
List of Occupations that Receive Tips. In response to these comments,
the Treasury Department and the IRS reviewed the same data sources
described in the proposed regulations (as well as the updated
preliminary 2024 tax data), examining the data for occupations listed
on individual income tax returns that were related to chiropractors,
accountants, tax preparers, clergy members, concert merchandise
sellers, and ``low bono'' legal service providers, in addition to
looking at the data for the SOC Codes related to these occupations.
Except for clergy members acting in certain roles, the Treasury
Department and the IRS determined that the data does not support that
these occupations were customarily and regularly tipped on or before
December 31, 2024. For that reason, these occupations are not included
in the List of Occupations that Receive Tips in the final regulations.
Concerning clergy, while the data does not support listing clergy
members as a separate occupation that customarily and regularly
received tips, it does reflect that clergy may receive tips in an event
setting such as a wedding or funeral. For this reason, they are
included as an illustrative example under ``Event officiants'' with a
TTOC of 505.
Some commenters asked that retail cashiers be included on the List
of Occupations that Receive Tips. The Treasury Department and the IRS
reviewed the same data sources described in the proposed regulations
(as well as the updated preliminary 2024 tax data), examining the data
for occupations listed on individual income tax returns that were
related to retail cashiers, in addition to looking at the data for the
SOC Codes related to this occupation. While tip-related income tax
return data does show that some individuals who self-identified as
``cashiers'' received tips, the data also shows that these cashiers
receiving tips mostly worked in an industry that would classify them as
an occupation separate from ``retail cashier.'' Specifically, many such
cashiers
[[Page 19033]]
worked in the Hotel and Food Services sectors so that these cashiers
would likely be categorized as Fast Food and Counter Workers (TTOC 107)
(for those in food establishments) or Hotel, Motel, and Resort Desk
Clerks (TTOC 303) (for those in hotel establishments). Thus, the data
does not support adding a more generalized ``cashier'' category, and
this occupation category is not included in the List of Occupations
that Receive Tips in the final regulations.
Another commenter requested that the full range of positions in the
gaming industry be included in the List of Occupations that Receive
Tips, including poker associates who change out chips in casinos, and
online dealers (sometimes known as game presenters) and other workers
in the online gaming industry. There is no statutory authority in
section 224 for including an occupation based solely on the fact that
it is practiced in a certain industry. Only occupations that
customarily and regularly received tips on or before December 31, 2024,
are included in the List of Occupations that Receive Tips. Occupations
in the gaming industry that meet this criterion are included in the
list. This includes many of the occupations identified by the
commenters, such as poker associates who change out chips in casinos
(included in ``Gambling Change Persons and Booth Cashiers'' (TTOC
202)). For these reasons, no additional occupational categories were
added to the List of Occupations that Receive Tips in response to this
comment.
One commenter asked that the regulations clarify the tax
consequences when managerial staff or owners participate in tip pools.
The rules under the FLSA prohibit managers and supervisors from
receiving tips from a tip pool. See 29 U.S.C. 203(m)(2)(b) and 29 CFR
531.54(c)(3) and (d). Given this prohibition under the FLSA, the final
regulations provide that amounts received by a manager or supervisor
through a voluntary or mandatory tip-sharing arrangement such as a tip
pool are not qualified tips. However, the final regulations also
clarify that amounts received directly by a supervisor or manager for
services they provided in the course of duties performed in an
occupation that customarily and regularly received tips on or before
December 31, 2024, are qualified tips if all other requirements for
qualified tips are met. Two examples that demonstrate this provision
concerning managers are included in the final regulations.
Finally, several commenters suggested that there should be a safe
harbor for all participants in a GITCA or Tip Rate Determination
Agreement (TRDA) providing that they are automatically considered in a
qualifying occupation. One commenter suggested that GITCA participants
should not be eligible for the deduction. Another commenter asked that
GITCA participants be able to claim the deduction based on their
designated tip rates. Section 224 provides no basis for automatically
considering participants in GITCA and TRDA as working in occupations on
the List of Occupations that Receive Tips. An occupation that did not
customarily and regularly receive tips on or before December 31, 2024,
is not eligible for the section 224 deduction, even if workers in a
similar occupation may have customarily and regularly received tips in
certain specific contexts (such as in a casino). For these reasons, no
safe harbor for GITCA and TRDA participants was added to the final
regulations. There also is no basis for excluding an otherwise eligible
individual from the section 224 deduction merely because the individual
is a participant in GITCA, and no such rule is included in the final
regulations. In addition, the proposed regulations would have provided
that GITCA participants could claim the deduction based on their
designated tip rates, and this provision is included in the final
regulations.
Other nonsubstantive edits were made to the chart to correct SOC
Code numbering errors. No occupations included on the proposed List of
Occupations that Receive Tips in the proposed regulations were removed
from the List of Occupations that Receive Tips in the final
regulations.
3. Comments on the Requirement That Qualified Tips Must Be Voluntary
Section 224(d)(2)(A) expressly requires that qualified tips are
paid ``voluntarily without any consequence in the event of nonpayment''
and not ``the subject of negotiation.'' The proposed regulations would
have provided that 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.
Concerning automatic gratuities, the proposed regulations would have
provided that qualified tips must be paid without compulsion and
therefore 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. However, if a customer is
expressly provided an option to disregard or modify amounts added to a
bill, such amounts are not mandatory amounts.
Several commenters supported the exclusion of automatic gratuities
from the definition of qualified tips in the proposed regulations.
These commenters agreed that an automatic gratuity is not voluntary as
required by section 224. Other commenters argued that automatic
gratuities and service charges serve the same purpose as other tips and
should be considered qualified tips. These commenters contended that
many employers already treat these amounts as tips and that automatic
gratuities are an important source of income for certain employees,
such as cooks and dishwashers, who do not typically receive tips
through tip-sharing arrangements due to FLSA tipping rules.\14\ Several
of these commenters maintained that automatic gratuities are an
important source of tips in large group and banquet situations. Several
commenters requested a transition rule, allowing individuals to treat
service charges as tips for 2025. Some commenters argued that an
automatic gratuity is voluntary in the sense that the customer takes
the automatic gratuity into account when deciding whether to patronize
an establishment.
---------------------------------------------------------------------------
\14\ The FLSA 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, and the employer cannot require the
employee to pool tips except with other ``employees who customarily
and regularly receive tips.'' 29 U.S.C. 203(m)(2)(A).
---------------------------------------------------------------------------
Automatic gratuities added to a bill with no explicit option for
the customer to decline or adjust the gratuity are mandatory because
the customer must pay the gratuity to receive the service. The
customer's ``option'' to reject the automatic gratuity by opting not to
patronize the business is not an option to pay or not pay a gratuity
(which is a choice a customer ordinarily makes based on the customer's
opinion of the service after the service is provided), but is instead
the option to patronize or not patronize the business (which is a
choice the customer makes based on, among other things, the cost of the
service, including the automatic gratuity, and the type and quality of
services offered by the business, before the customer receives any
service). In addition, the business determines the tip percentage of an
automatic gratuity, not the customer (i.e., the payor). For these
reasons, automatic gratuities do not comply with the requirements for
qualified tips provided by section 224(d)(2)(A). To the extent that the
customer freely decides to provide an additional gratuity, this
additional
[[Page 19034]]
amount constitutes a qualified tip if all factors are met with respect
to that portion.
In addition, the IRS has long maintained that service charges do
not qualify as tips. 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.
Because the proposed regulations are consistent with section 224
and the IRS's longstanding position that service charges are not tips,
the final regulations maintain the position in the proposed regulations
that automatic gratuities, such as service charges, are not qualified
tips for purposes of the deduction. In addition, because the statute is
clear on this point and the IRS's position that automatic gratuities
are not tips has been publicly available since at least 2012, a
transition rule for 2025 concerning automatic gratuities is not
warranted.
One commenter noted that while Revenue Ruling 2012-18 used similar
rules to section 224(d)(2)(A) to distinguish between tips and service
charges for FICA and income tax withholding purposes, the revenue
ruling, unlike the proposed regulations, did not include examples with
respect to ``suggested gratuities''. The commenter suggested that the
revenue ruling be updated to include examples of ``suggested
gratuities'' that mirror those in the proposed regulations to provide
further clarification of the revenue ruling's application in these
situations. The Treasury Department and the IRS agree that the revenue
ruling contains rules for distinguishing tips from service charges that
are similar to the rule provided in section 224(d)(2)(A) and that
``suggested gratuities,'' as described in the proposed regulations,
comply with these rules such that they would be considered tips under
the revenue ruling. Updates to Revenue Ruling 2012-18 are outside the
scope of these final regulations, but the Treasury Department and the
IRS will consider updating Revenue Ruling 2012-18 or providing
additional guidance containing examples involving suggested gratuities
and the employment tax consequences of those payments.
The proposed regulations would have provided several examples
demonstrating voluntary tipping practices involving Point-of-Sale (POS)
system. Some commenters requested that the final regulations clarify
that other POS systems are considered voluntary as long as they provide
the customer with the option of selecting a zero value. Specifically,
several commenters mentioned ``tip sliders'' that allow the customer to
designate a tip using a sliding bar on a POS screen, which the customer
``slides'' to the desired tip amount. Other commenters asked about POS
systems that only allow the customer to either choose a percentage or
choose ``other'' and input zero manually.
The proposed regulations would have provided that if a customer is
expressly provided an option to disregard or modify amounts added to a
bill, such amounts are not mandatory amounts. The language in the final
regulations has been modified slightly to make clear that the customer
must have the option to reduce the tip amount to zero. Under this
provision, tip selection methods such as POS systems with a tip slider
that goes to zero or an option for the customer to select ``other'' and
input zero are voluntary. The examples in the final regulations have
been modified to clarify that these methods are considered voluntary
tipping practices.
A few commenters asked if contractual arrangements that include
suggested tips for services before they are provided are voluntary
tips. One commenter asked for clarification as to what ``without
consequence'' means. In Sec. 1.224-1(c)(3) (Example 8) of the proposed
regulations described a contract with varying prices depending on
whether a tip was included. The failure to agree to a specific tip
amount resulted in a higher price for the service. Accordingly,
nonpayment of the tip was not ``without consequence'' in this situation
(because nonpayment resulted in a higher price). If the contract terms
merely added the discretionary tip as a ``convenience'' for the
customer, subject to the customer's agreement, the tip would be
voluntary. The Treasury Department and the IRS agree that additional
guidance would be helpful on this issue. Although whether the failure
to pay a tip is made ``without consequence'' will depend on the facts
and circumstances of a particular situation, the final regulations
clarify that situations where nonpayment of a tip is without
consequence include situations where nonpayment of the tip does not
have any impact on the scope or cost of the service. The final
regulations also contain a new example where the tip is part of the
contract that is entered into before the services are provided. The
example concludes that the tip is a qualified tip because it is paid
without consequence. If the customer had chosen to not pay the tip then
the scope or cost of the service would not have been affected.
Several commenters requested clarification regarding the voluntary
nature of payments to digital content creators. One commenter noted
that creators often perform multiple activities in a single session,
and payments could be intended for different activities. The commenters
asked for guidance on when payments are tips versus compensation for
performance or content. One commenter asked that the final regulations
clarify that audience engagement mechanisms such as ``super chats,''
and ``super stickers,'' which provide superficial digital rewards to
consumers of digital content, are qualified tips. Other commenters
asked that the final regulations address situations where the platform
hosting a digital content creator's content receives a portion of the
tip amount.
In response to the comments regarding the activities of digital
content creators, the final regulations include two new examples to
help clarify when payments to digital content creators are tips and
when they are compensation. One example involves customer payments to a
digital content creator that enable customers to gain access to the
creator's content. These payments are not tips, but rather compensation
to the creator for services provided (i.e., the content). The other
example involves voluntary customer payments to a digital content
creator after the customer has already gained access to the creator's
content, which is a tip to the content provider because the payment was
not required to access content and was voluntary and determined by the
customer.
The final regulations also clarify that tipping digital content
creators through audience engagement mechanisms that result in
superficial digital rewards, such as highlighted messages or other
digital tokens of appreciation from the tip recipient that are
negligible in value, do not disqualify an otherwise qualified tip. The
final regulations also provide an example involving digital content
creators and audience engagement mechanisms.
[[Page 19035]]
Concerning platforms that retain a portion of amounts provided as
tips to content creators, platform hosting is not the equivalent of
content creation and is not on the List of Occupations that Receive
Tips. Section 224(d)(1) provides that the term ``qualified tips'' means
cash tips received by an individual. For purposes of the statute, the
term ``individual'' refers to the person performing the services and
receiving tips in connection with those services and does not include
an entity that facilitates payment or transmits amounts between
customers and service providers. In the context of digital content
creation, amounts provided by users as tips are received only to the
extent such amounts are paid to the content creator. Any portion of a
user's payment that is retained by a host platform, which is not an
occupation on the List of Occupations that Receive Tips, is not
received by the individual content creator and is not a qualified tip
for purposes of the section 224 deduction. No changes were made to the
final regulations in response to this comment.
4. Other Comments Regarding the Definition of ``Qualified Tips''
Several commenters asked that the final regulations clarify whether
tips that are not reported on an information return because, for
instance, the tip is provided in cash to an independent contractor or
is below the required reporting threshold for certain information
returns, are qualified tips. Other commenters asked that the IRS
provide a mechanism similar to Form 4137 for independent contractors to
report tips that are not included on an information return.
The text of section 224(a) allows a deduction only for amounts of
qualified tips that are ``included 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), or reported by the taxpayer on
Form 4137 (or successor).'' The proposed regulations would have
included similar language in Sec. 1.224-1(a). In response to these
comments, the final regulations further clarify that amounts received
as a tip that are not separately reported to an individual on a
statement furnished to the individual pursuant to section 6041(d)(3),
section 6041A(e)(3), section 6050W(f)(2), or section 6051(a)(18), or
reported by the taxpayer on Form 4137 (or successor) are not eligible
for the deduction under section 224. But see Notice 2025-69 for
transition rules related to 2025. Issues related to reporting
requirements, such as providing a means by which independent
contractors can report tips that are not included on an information
return, are beyond the scope of these regulations. The requirement that
tip amounts be reported to independent contractors on an information
return is statutory and serves as an anti-abuse measure to prevent
independent contractors from recharacterizing income as tips.
Another commenter asked that the final regulations provide a
mechanism for partners to claim the deduction. The amount of a tip
received by a partner in a partnership in the individual's capacity as
a partner would be reported on an information return provided to the
partnership, not to the individual partner, even if the individual
partner ultimately receives the tip. Section 224(a) is clear that only
qualified tips included in a statement furnished to an ``individual''
can be allowed as a deduction under section 224. Because the statement
reporting the tip is provided to the partnership, not the individual,
the partner cannot claim this amount as a deduction under section 224.
Finally, one commenter requested that the final regulations clarify
eligibility for the deduction for an employee who works in two
different occupations for the same employer, one occupation that is on
the List of Occupations that Receive Tips and one that is not. If all
other section 224 statutory and regulatory requirements are met, any
tip amount received in an occupation that is on the List of Occupations
that Receive Tips in Sec. 1.224-1(i) may be claimed as a deduction
under section 224. Tip amounts received in an occupation that is not on
the List of Occupations that Receive Tips are not eligible for the
deduction. If an individual works in two occupations, one that is on
the List of Occupations that Receive Tips and one that is not, the
individual may claim the qualified tip amounts received in the
occupation that is on the List of Occupations that Receive Tips as a
deduction under section 224 (assuming all other statutory and
regulatory requirements are met), but may not claim as a section 224
deduction any tip amounts received in the occupation that is not on
this list. If an employee works in two occupations that are both on the
List of Occupations that Receive Tips, the individual may claim the
qualified tip deduction with respect to amounts received in both
occupations under section 224. Since this result is a function of
existing rules in the proposed regulations, no change was made in the
final regulations to address this question.
5. Cash Tips Definition
The proposed regulations would have defined 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. The proposed regulations would
have excluded from this definition 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). The proposed regulations would have defined ``tips'' as
``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.
Several commenters asked for more clarification on the definition
of cash tips. One commenter suggested that ``cash tips'' be defined as
any medium denominated in U.S. cash, so as not to imply a preference
for physical currency. Some commenters asked that the final regulations
affirm that the use of certain specific methods of payment, including
digital tipping systems (such as mobile apps), ticket-out/ticket-in
systems (used in casinos), and digital assets such as stablecoins,
bitcoin and ether (referred to as Ethereum in the comment), qualify as
cash tips for purposes of the deduction. One commenter asked that the
final regulations allow for future guidance to define cash tips in the
event other dollar-pegged methods become available. A few commenters
requested the final regulations address foreign-sourced tip amounts and
domestic-sourced tip amounts that are paid in foreign currency,
specifically, whether these amounts qualify for the deduction and the
reporting obligations for foreign-sourced income.
Commenters also asked whether voluntary amounts that are added to
e-commerce purchases and donations made to community websites are
qualified tips.
The Treasury Department and the IRS have determined that the cash
tips definition in the proposed regulations generally provides a
comprehensive definition that already addresses the various methods of
payment about
[[Page 19036]]
which commenters inquired. For this reason, the definition of cash tips
in the final regulations remains largely unchanged from the proposed
regulations with the exception that the final regulations clarify that
for purposes of section 224, cash tips also include amounts paid in
foreign currency. Concerning digital tipping systems, if the tips
provided through the system are denominated in cash (i.e., paid as a
fixed amount of currency); are in excess of the amount agreed to,
required, charged, or otherwise reasonably expected to have to be paid
for the services; and are provided to an independent contractor or, if
provided to an employee, are provided to the employee directly or
through a tip-sharing arrangement, then the tips are considered cash
tips for purposes of the deduction. In order for the amount to be
eligible for the section 224 deduction in the case of an employee, the
amount must also be reported to the employer as required by section
6053(a) \15\ or reported by the employee on Form 4137. Similarly, if
tips provided using a casino ticket-out, ticket-in system comply with
the requirements for cash tips provided in these final regulations,
then the tips are cash tips.
---------------------------------------------------------------------------
\15\ With respect to employees, the existing rules under section
6053(a) require employees to report tips received in the course of
their employment to their employers, and employers to take those
reported amounts into account for wage reporting purposes. This
reporting requirement does not apply to independent contractors.
---------------------------------------------------------------------------
The proposed regulations did not directly address the treatment of
stablecoins pegged to the value of the U.S. dollar. Some commenters
noted that the intended treatment of stablecoins under the proposed
regulations was unclear and requested clarification. These requests,
and other developments, have led the Treasury Department and the IRS to
reconsider whether any digital assets, including stablecoins, should be
considered cash tips for purposes of section 224. Most notably, in July
18, 2025, Congress enacted the Guiding and Establishing National
Innovation for U.S. Stablecoins (GENIUS) Act (Pub. L. 119-27), which
provides a framework for regulating certain stablecoins, referred to as
``payment stablecoins.'' \16\ The GENIUS Act makes clear that payment
stablecoins are distinct from national currencies and provides that
payment stablecoins may not be marketed as legal tender or as issued by
the United States. On September 19, 2025, the Treasury Department
published an Advance Notice of Proposed Rulemaking (ANPRM) soliciting
public comments on questions relating to the implementation of the
GENIUS Act (90 FR 45159). Though the GENIUS Act does not address the
Federal income tax treatment of payment stablecoins, the ANPRM
solicited comments on the extent to which guidance on their tax
treatment would be necessary or helpful to taxpayers. The Treasury
Department is reviewing the comments it received on the ANPRM and
considering potential guidance on these topics, including whether
payment stablecoins should be treated as cash or cash equivalents for
certain U.S. Federal income tax purposes. In addition, legislative
proposals have been advanced that would address various tax issues
relating to digital assets, including the treatment of stablecoins.
---------------------------------------------------------------------------
\16\ The GENIUS Act becomes effective on the earlier of January
18, 2027, or 120 days after final implementing regulations are
issued. The term ``payment stablecoin'' is defined in section 2(22)
of the GENIUS Act.
---------------------------------------------------------------------------
In light of the foregoing, the final regulations provide that all
digital assets (as that term is defined in section 6045(g)(3)(D) of the
Code and Sec. 1.6045-1(a)(19)) are excluded from the definition of
cash tips. The Treasury Department and the IRS will consider the tax
treatment of payment stablecoins in connection with implementation of
the GENIUS ACT, including whether these final regulations should be
revised if payment stablecoins are treated as cash or cash equivalents
for other U.S. Federal income tax purposes. Additionally, if
legislation is enacted that modifies the characterization of digital
assets or of particular digital assets such as payment stablecoins such
that they may be more appropriately characterized as ``cash tips,'' the
Treasury Department and the IRS will take that legislation into account
in considering whether to revise the rules governing the treatment of
digital assets provided in these final regulations.
Concerning future guidance for other methods of payment, if the
need arises to address other methods of payments, the Treasury
Department and the IRS will consider issuing additional guidance at
that time.
Regarding comments on e-commerce voluntary surcharges, whether or
not a voluntary surcharge added to an e-commerce purchase is a
qualified tip depends on the occupation of the tip recipient. If the
service provided through the e-commerce transaction is from a person
providing that service in an occupation that is on the List of
Occupations that Receive Tips, and all other requirements for qualified
tips are met, then the tip is a qualified tip. For example, if a
customer commissions an artist on an e-commerce site to create a piece
of art, and the customer includes a cash tip when providing payment,
the cash tip is a qualified tip if all other requirements for qualified
tips are met because ``artist'' is an occupation included in the List
of Occupations that Receive Tips.
Finally, concerning voluntary charitable donations, including
donations to community websites for the benefit of an individual or
group of individuals, such amounts are not qualified tips because they
are not amounts paid to an individual in excess of an expected or
agreed-upon amount for a service provided in an arm's length
transaction.
6. Specified Service Trade or Business Exclusion
The proposed regulations would have provided that an amount
received by an individual in the course of a specified service trade or
business (as defined in section 199A(d)(2) and Sec. 1.199A-5(b)) is
not a qualified tip. 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, and the
proposed regulations would have clarified that this rule would have
applied without regard to whether an owner of the trade or business is
able to claim a section 199A deduction. The proposed regulations would
have also clarified that this rule applies even if the employee
receiving tips in the course of working for a specified service trade
or business employer is working in an occupation that customarily and
regularly received tips on or before December 31, 2024, and is listed
on the proposed List of Occupations that Receive Tips. The Treasury
Department and IRS requested comments on the application of the
existing rules under Sec. 1.199A-5(b) to the specified service trade
or business definition in section 224.
One commenter expressed concern that using the definition of a
specified service trade or business from section 199A(d)(2) may exclude
occupations that have historically received tips. Another commenter
noted that Treasury and IRS lack the authority to expand the tips
deduction by deviating from section 199A(d)(2)'s definition of a
specified service trade or business. Several commenters suggested that
additional guidance be issued to explain how the specified service
trade or business rules apply in determining the qualified tips
deduction, including adding examples of how the specified service trade
or business rules apply in different employment and self-employment
scenarios and the recordkeeping
[[Page 19037]]
requirements that must be met. One commenter requested specific
guidance regarding the interplay of the hotel and lodging industry and
qualified tips for those engaged in a specified service trade or
business. Another requested that the act of providing personal
appearance services, such as barbering, not be considered a specified
service trade or business for purposes of the deduction. Another
commenter noted that the exclusion for tips received in a specified
service trade or business creates uncertainties and administrative
complexities for employers and tipped workers, and that certain
employers that did not previously have to determine whether they were
specified service trade or businesses will now have to make such
determinations. One commenter supported a clarification in the final
regulations that roles that do not pertain to the principal trade or
business at an establishment may still receive the deduction from tips
paid in the course of employment at a specified service trade or
business.
One commenter suggested that the specified service trade or
business exclusion be applied when taxpayers file their personal income
tax returns, rather than by requiring Form W-2 and Form 1099-series
reporting. Another commenter requested that the final regulations
refine the definition of specified service trade or business in Sec.
1.199A-5 for section 224 purposes by providing objective criteria for
the term, ``reputation or skill,'' defining the terms ``appearance at
an event'' and ``well known,'' and adopting a de minimis safe harbor so
that occasional demonstrations or media moments while working for a
non-specified service trade or business employer do not trigger
specified service trade or business classification. The commenter also
recommended that the final regulations clarify whether a person who is
not ``well-known'' and working for a non-specified service trade or
business employer at an event may nevertheless trigger tip
disqualification if they make an incidental specified service trade or
business ``appearance.''
The deduction for qualified tips is a newly enacted provision and
taxpayers receiving tips in 2025 are determining their eligibility for
the deduction for the first time. As stated in Notice 2025-69, the
Treasury Department and the IRS understand that it may be difficult for
taxpayers to determine whether their tips were received in the course
of a specified service trade or business. This may be particularly
difficult for employees, since section 224(d)(2) provides that this
determination turns on whether the trade or business of their employer
in the course of which they receive tips is a specified service trade
or business. In light of these considerations, Notice 2025-69 provided
transition relief for taxpayers regarding the requirement that
qualified tips must not be received in the course of a specified
service trade or business. In the interest of sound tax administration,
Notice 2025-69 provided a transition period for purposes of IRS
enforcement and administration with regard to the specified service
trade or business requirement. Specifically, the Notice stated that,
until January 1 of the first calendar year following the issuance of
final regulations regarding the determination of whether a trade or
business is a specified service trade or business for purposes of
section 224 and associated employer information reporting, the IRS will
treat taxpayers (both employees and self-employed individuals) as
having received tips in the course of a trade or business that is not a
specified service trade or business if the taxpayer is in an occupation
that customarily and regularly received tips on or before December 31,
2024, as provided by the Secretary. The Notice further provided that
the Treasury Department and the IRS intend to issue proposed
regulations and solicit public comment on these issues before
publishing final regulations. The final regulations do not address the
specified service trade or business exclusion under section 224, but
subsection (g) of Sec. 1.224-1 is reserved for guidance on this
exclusion.
7. Comments Concerning Amounts Received for Illegal Activities,
Pornography, and Prostitution
The proposed regulations would have provided that any amount
received for a service the performance of which is a felony or
misdemeanor under applicable law is not a qualified tip. The proposed
regulations would have further excluded from the definition of
qualified tips, any amount received for prostitution services and any
amount received for pornographic activity.
Some commenters supported these exclusions, and one commenter
requested that this exclusion be expanded to include amounts paid to
strippers, exotic dancers, or other sexually suggestive performers who
dance solely for the purposes of provocation. Several other commenters
objected to the exclusions, arguing that the Treasury Department and
the IRS lack authority to impose these restrictions. In addition to
noting that certain pornography is legal, some commenters stated that
pornography is protected First Amendment speech, that these businesses
pay taxes, and that in fairness these businesses and their employees
should have access to the deduction for qualified tips. One commenter
suggested the prohibition be limited to activity that is unlawful under
State or Federal law. Several commenters requested that the regulations
define pornographic activity.
Section 224(d)(2)(C) provides an amount received by an individual
is not a qualified tip unless ``such other requirements as may be
established by the Secretary in regulations or other guidance are
satisfied.'' The exclusion from qualified tips for illegal activities,
prostitution services, and pornographic activities falls under the
authority granted to the Treasury Department and the IRS in section
224(d)(2)(C) and (g), and these provisions remain unchanged in the
final regulations. This exclusion is intended to address the potential
for greater noncompliance and abuse with respect to these activities
and services. The Treasury Department and the IRS will consider whether
to provide additional guidance regarding these exclusions.
One commenter noted that State-legal cannabis industry workers
operate in regulated, State-compliant industries and should not be
excluded merely because their employers engage in commerce that
involves a federally classified controlled substance. Workers in the
cannabis industry must meet statutory and regulatory requirements like
any other employee to be eligible for the deduction for qualified tips.
Tips received by these workers must be received in an occupation that
is included on the List of Occupations that Receive Tips and must not
be received for a service the performance of which is a felony or
misdemeanor under applicable law, including under Federal law, to be
qualified tips eligible for the deduction under section 224. Currently,
Federal law and many State laws generally make it unlawful to
manufacture, distribute, dispense, or possess marijuana. If Federal law
changes, making certain marijuana-related transactions legal, and those
same transactions are legal under State law, then tip amounts received
in such transactions may be qualified tips if all other requirements
for qualified tips are met. No change was made in the final regulations
in response to this comment.
8. Anti-Abuse Rules
Section 224(g) provides that, ``[t]he Secretary shall prescribe
such regulations or other guidance as may be necessary to prevent
reclassification of
[[Page 19038]]
income as qualified tips, including regulations or other guidance to
prevent abuse of the deduction allowed by this section.'' Under this
authority and to prevent reclassification of income as qualified tips
and other abuses, the proposed regulations would have provided 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. Further, section
224(d)(2)(A) defines ``qualified tips'' as amounts that are, among
other things, ``determined by the payor.'' The proposed regulations
would have reiterated this rule as part of the requirement that
qualified tips be voluntary.
Several commenters suggested providing additional rules to prevent
recharacterization of non-tip income to tip income. One commenter noted
that the regulations contain no bright-line anti-abuse tests, specific
prohibitions, or illustrative examples that delineate permissible
versus impermissible practices and suggested there should be a bright
line test that triggers disallowance. Another commenter suggested
broadening the definition of qualified tips under the proposed
regulations to include an anti-recharacterization provision that states
that an amount is not a ``qualified tip'' if, based on all the facts
and circumstances, it represents an arrangement to replace or suppress
wages, or attempts to reclassify service charges or wages as tips for
the purpose of obtaining the deduction. Another commenter asked that
``tips'' or gratuities be very specifically defined so that performance
bonuses for professional services are not included. One commenter
recommended concrete standards, evidentiary benchmarks, or examples
that would deter artificial recharacterization, guide audit selection
procedures, and state what indicators auditors would look for and what
type of documentation would be required.
Other commenters suggested modifications to the rule prohibiting
qualified tips from being paid to individuals with an ownership
interest in the payor and to employees of the payor. One commenter
suggested that an example of a non-abusive situation in which an
employee's employer is the payor of a tip would be when an employee is
employed by two unrelated employers, one for a tipped occupation and
one for a non-tipped occupation, and the employer for the non-tipped
occupation tips the employee for services provided by the employee in
the tipped occupation. The commenter suggested that the final
regulations limit the rule by providing a narrow definition of
``ownership interest'' that excludes de minimis or incidental holdings,
and by limiting the application of the rule to situations where the
tipped worker knows, or reasonably should know, that the ultimate
source of funds is their employer.
The Treasury Department and the IRS agree that additional clarity
on the prohibition against reclassification of income as qualified tips
would be helpful. To that end, the final regulations replace the
provision prohibiting ownership in or employment by a payor with a
provision stating that an amount is not a qualified tip, and thus not
eligible for the deduction if, based on all relevant facts and
circumstances, the amount represents a recharacterization of wages or
payments for goods or services for purposes of claiming the deduction.
The final regulations further provide that facts and circumstances that
may indicate a recharacterization of wages, payment for services, or
other income as tips include:
A charge for services provided in an invoice is less than
the payment from the payor shown on a related receipt or information
return, and the cash tip reported on the receipt or information return
is in an amount that approximates the difference between the charge
amount on the invoice and payment amount on the receipt or information
return; and
A significant shift in historical tipping or payment
practices between the payor and the tip recipient.
In addition, the final regulations provide that if the following
facts and circumstances are present, there is an irrebuttable
presumption that the amount paid reflects a recharacterization of
wages, payment for services, or other income as tips, and therefore
cannot be a qualified tip:
The employer of an employee is the payor, as defined in
Sec. 1.224-1(c)(5) of the final regulations, of a cash tip received by
the employee.
The tip recipient has a direct ownership interest in the
payor, as defined in Sec. 1.224-1(c)(5) of the regulations, of a cash
tip.
The final regulations define ownership interest to mean, in the
case of a corporation, ownership (by vote or value) of five percent or
more of the stock in such corporation; in the case of a partnership,
ownership of five percent of the profits interest or capital interest
in such partnership, or in any other case, ownership of more than five
percent of the beneficial interests in the entity. An ownership
interest is tested as of the date the tip is received. The final
regulations also provide that an ownership interest is a direct
ownership interest if it is an ownership interest held directly by the
tip recipient or if it is an ownership interest held through an entity
disregarded as separate from its owner for Federal income tax purposes;
an ownership interest held through a qualified subchapter S subsidiary
as defined in section 1361(b)(3) of the Code; an ownership interest
held through a grantor trust (under subpart E of part 1 of subchapter J
of charter 1 of the Code); or an ownership interest held through a
custodian, broker, nominee, agent, or other similar intermediary.
Because of its potential for abuse, the final regulations provide
no specific exceptions for the situation in which an employee has more
than one employer, and the employer unrelated to the tipped occupation
provides a tip to the employee.
Per the suggestion that ``tips'' be very specifically defined, the
final regulations adopt the definition of tips from the proposed
regulations. Under this definition, 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. An amount that meets this
definition (whether labeled as a performance bonus for services or
otherwise) is a tip for purposes of the deduction under section 224.
Whether the tip is a qualified tip depends on whether the other
requirements under section 224 and these final regulations are
satisfied. Concerning the audit selection procedure suggestions, as
noted earlier, audit selection and other IRS enforcement procedures are
beyond the scope of these regulations.
One commenter requested confirmation that a tip received directly
from a customer by a single-member limited liability company (LLC) or
sole proprietor will not be disallowed merely because the entity could
be viewed as making the payment to the individual owner. In response to
this comment, and to provide clarity concerning who is considered the
payor of a tip, the final regulations define the term ``payor'' as the
ultimate recipient of the services which, in most cases, is the
customer, client, or other service recipient. The final regulations
further clarify that an entity, such as an employer, a third party
settlement organization, or a sole proprietorship or single-member LLC
through which a tip recipient is doing business, that acts merely as
conduit to remit a tip initially paid by a customer, client, or service
recipient to the tip recipient, is not a payor of the tip for
[[Page 19039]]
purposes of these regulations. Finally, the final regulations clarify
that statements furnished to a sole proprietorship or a single-member
LLC that does not elect to be treated as a corporation for income tax
purposes owned by a tip recipient are considered to be furnished to the
tip recipient owner of the sole proprietorship or single-member LLC to
which the statement was issued, regardless of whether the name of the
sole proprietorship or single-member LLC appears as the recipient on
the statement.\17\
---------------------------------------------------------------------------
\17\ Form W-9, Request for Taxpayer Identification Number and
Certification, instructs both sole proprietorships and single-member
LLCs (not treated as a corporation) to include the individual name
of the owner on line 1. Therefore, if the payee completes Form W-9
correctly, and the payor correctly uses the info on Form W-9 to
complete the appropriate Form 1099, then the individual's name
should appear on the Form 1099. However, this rule is intended to
clarify that if the instructions change or if the form is
incorrectly filled out and includes only the business name, the
reporting statement is still considered to be issued to the owner of
the sole proprietorship or single-member LLC.
---------------------------------------------------------------------------
9. Tip-Sharing Arrangements
Section 224(d)(3) defines cash tips to include ``tips received
under any tip-sharing arrangement.'' Consistent with this definition,
the proposed regulations would have defined cash tips to include ``tips
received from customers or, in the case of an employee, through a
mandatory or voluntary tip-sharing arrangement, such as a tip pool.''
Some commenters requested more guidance on tip-sharing
arrangements. One commenter asked that the final regulations
distinguish between a voluntary customer tip received by an employee, a
mandatory service charge imposed by the employer, and an employer-
mandated tip pool that redistributes tips. The definition of cash tips
in the proposed regulations would have included both tips received
through ``a mandatory or voluntary tip-sharing arrangement,'' and this
is consistent with the broad statutory language that defines cash tips
to include tips received under any tip-sharing arrangement. The final
regulations contain similar language with nonsubstantive revisions.
One commenter asked for more guidance concerning staff who
participate in tip-sharing arrangements but who may not be listed
specifically in the List of Occupations that Receive Tips. 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.
However, the employee must still receive the tips in an occupation that
customarily and regularly received tips on or before December 31, 2024.
Participation in a tip-sharing arrangement by itself is not sufficient.
The employee must also be in an occupation on the List of Occupations
that Receive Tips, and all other statutory and regulatory requirements
must be met. No additional language was added to the final regulations
to address this comment.
A few commenters were concerned about State laws on tip-sharing
arrangements such as tip pooling. One commenter wanted the regulations
to clarify that employees on the List of Occupations that Receive Tips
are eligible for the deduction, even if they work in a State that
prohibits or restricts tip pooling. Another commenter requested that
the regulations provide that they preempt State laws concerning tip
pooling. Nothing in section 224 prohibits an individual from claiming
the deduction because of State law involving tip-sharing arrangements
such as tip pooling. However, section 224 is a Federal income tax
deduction. It does not impact Federal or State laws concerning tip-
sharing arrangements. Since these rules are a function of existing laws
and outside the scope of these regulations, no language was added to
the final regulations concerning this comment.
10. Married Individuals and Social Security Numbers
Section 224(b)(1) limits the deduction for qualified tips 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, with the deduction phasing out for
taxpayers with modified adjusted gross income over $150,000 ($300,000
for joint filers). 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.
Reflecting these statutory provisions, the proposed regulations
would have provided 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 have provided that the amount is subject to the phase-out based
on the taxpayers' modified adjusted gross income described in section
224(b)(2). Finally, the proposed regulations would have provided that
taxpayers who are married must file a joint return to claim the
deduction allowed by section 224.
Several commenters asserted that the $25,000 maximum annual
deduction should apply per spouse on a joint return. They argued that
limiting the deduction to $25,000 in this instance penalizes married
individuals and unfairly disadvantages joint filers when both spouses
work in tipped occupations. These commenters also noted that households
with two tipped workers face higher work-related costs and should have
a higher cap. At least one commenter agreed with the position in the
proposed regulations that the maximum deduction should be limited to
$25,000 per return, regardless of filing status.
Section 224(b)(1) limits the amount of the deduction to $25,000 for
any taxable year, without reference to filing status. Consistent with
this statutory language, the final regulations maintain the position of
the proposed regulations that the maximum annual deduction for an
individual or a joint return is $25,000.
One commenter asked that the IRS consider indexing this threshold
to updated cost-of-living and inflation factors or increasing the
threshold outright to $200,000/$300,000 to ensure the deduction
effectively benefits the intended middle-class earners and families.
Because such indexing is not provided for in section 224, the final
regulations do not include this suggestion.
One commenter opposed requiring married individuals to file jointly
in order to be eligible for the deduction. Because section 224(f)
requires married individuals to file jointly in order to be eligible
for the deduction, the final regulations retain this rule.
In accordance with section 224(e), the proposed regulations would
have provided that to claim a deduction under section 224, a taxpayer
must include on the taxpayer's tax return a valid for work SSN (valid
SSN) that was issued before the due date of the return (including
extensions). The proposed regulations would have further provided that
married taxpayers are required to include the valid SSN of the taxpayer
who has received the tips to claim the deduction, and a valid SSN is
required of both taxpayers only when both have qualified tips for which
the deduction is being claimed.
One commenter stated that the SSN requirement risks
disproportionate exclusion of immigrant and informal workers and could
incentivize
[[Page 19040]]
underreporting or off-the-books arrangements and suggested providing an
Individual Taxpayer Identification number (ITIN) safe harbor
illustration. Another commenter said that the IRS should not impose a
requirement that both spouses use SSNs. Finally, one commenter asked
that the regulations include easy examples showing what to do when only
one spouse receives tips and what to keep on file if someone moves from
ITIN to SSN during the year, so they do not lose the deduction.
The valid SSN requirements are statutory. Consistent with these
statutory provisions, the final regulations contain the same
requirements as the proposed regulations. Income tax return
instructions will include information and examples for how to claim the
deduction, including how married taxpayers filing jointly claim the
deduction if just one spouse has tip income. If a taxpayer is issued a
valid SSN for the calendar year in which the taxpayer is claiming the
deduction under section 224, the taxpayer may use all qualified tips
received in that calendar year in determining the deduction, as long as
the taxpayer includes the valid SSN on the taxpayer's return for that
year. The final regulations reflect this clarification.
Another commenter suggested that the regulations explicitly bar
noncitizens from being eligible for the section 224 deduction. Section
224(e) prohibits the deduction unless the taxpayer's valid SSN is
listed on the return claiming the deduction. As the proposed
regulations would have done, the final regulations include this
prohibition. However, certain noncitizens are eligible to obtain valid
SSNs and therefore would be eligible for the section 224 deduction.
11. Self-Employed Individuals
In accordance with 224(c), the proposed regulations provide that
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.
Several commenters had questions concerning how to determine net
income for purposes of section 224(c). One commenter asked that the
regulations confirm that the deduction cannot create or increase a
loss. Another commenter requested that the regulations explicitly state
whether the self-employed health insurance deduction, the one-half of
self-employment tax deduction, and the self-employed retirement
deduction are allocable to the trade or businesses for purposes of
section 224(c). Another commenter requested precise guidance, with
illustrative examples, on how ``net income'' should be calculated for a
sole proprietor filing Schedule C, specifically clarifying whether this
figure is before or after the deduction of ordinary and necessary
business expenses (like booth rent, supplies, and self-employment tax).
Consistent with section 224(c), the proposed regulations would have
provided that the section 224 deduction cannot create or increase a
loss. Whether any particular deduction, such as the self-employed
health insurance deduction, the one-half of self-employment tax
deduction, and the self-employed retirement deduction, is allocable to
a trade or business for purposes of section 224(c) is a question that
is beyond the scope of these regulations. However, section 224(c) is
clear that the qualified tip deduction is not allocable to a trade or
business for purposes of this section. For any individual performing
services in a trade or business (other than as an employee), such as a
sole proprietor filing a Schedule C, the deduction for qualified tips
under section 224 for that trade or business is limited to the amount
remaining after gross income from the trade or business, including the
qualified tips received in the course of the trade or business, is
reduced by the deductions allocable to the trade or business in which
the tips are received, which, in the case of a sole proprietor filing a
Schedule C, would include the expenses deducted on the Schedule C for
that trade or business.
Some commenters had general questions about independent
contractors. One commenter stated that gig workers who are considered
independent contractors should qualify for this deduction as the tips
are a part of the job. Another commenter asked that the regulations
provide a short example involving an independent contractor with more
than one occupation (for example, at a salon and a separate makeup
service) to demonstrate how to allocate tips and apply the $25,000
deduction maximum. One commenter asked that the regulations provide
formal transition relief for self-employed individuals allowing for a
``reasonable estimate'' of qualified tips received between January 1,
2025, and the publication date of the final rule.
Gig workers can qualify for this deduction if their occupation is
on the List of Occupations that Receive Tips and the other statutory
and regulatory requirements of section 224 are met. The $25,000 maximum
deduction is applied per tax return and is not applied separately to
different occupations for a taxpayer, or spouses in the case of spouses
filing jointly, with multiple occupations. Instructions for how to
apply the $25,000 maximum deduction limitation when claiming the
deduction are beyond the scope of these regulations but will be
provided in instructions to income tax returns. Transition relief for
individuals claiming the deduction under section 224 in tax year 2025
is provided in Notice 2025-69. Because these comments are addressed
elsewhere in the final regulations, as well as in other guidance, no
additional changes were made to the final regulations to address these
comments.
12. Other Comments
A few commenters asked that the final regulations address certain
situations where children receive tips. One commenter suggested that
the regulations address child digital content creators and the
deduction's applicability as it relates to parents claiming the income
of their social media influencer children. Another commenter suggested
rules that exclude parents who ``tip'' their child's business with
large amounts to effectively increase gift tax (and similar tax)
exemption limits. These comments are beyond the scope of these
regulations. Nothing in section 224 nor these regulations change the
rules governing the reporting and treatment of income received by
children or the rules regarding gift taxes.
13. Severability
If any provision in this rulemaking is held to be invalid or
unenforceable facially, or as applied to any person or circumstance, it
shall be severable from the remainder of this rulemaking, and shall not
affect the remainder thereof, or the application of the provision to
other persons not similarly situated or to other dissimilar
circumstances.
Applicability Dates
These regulations apply for taxable years beginning after December
31, 2024. As stated in the NPRM, taxpayers may rely on the 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 the proposed
regulations in their entirety and in a consistent manner.
[[Page 19041]]
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 final regulations have been designated by the Office of
Management and Budget's (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 final
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 final
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,\18\ 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).
---------------------------------------------------------------------------
\18\ References to a ``section'' are to a section of the
Internal Revenue Code of 1986, as amended (Code), unless otherwise
indicated.
---------------------------------------------------------------------------
The final 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 final 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 final regulations is to provide guidance on
requirements of section 224 to claim the deduction, including the
definition of ``cash tips;'' 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), that section 224 shall
apply only if the taxpayer and the taxpayer's spouse file a joint
return for the taxable year. The final 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 Final 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 final regulations clarify that
``cash tips'' are amounts received, directly or indirectly, from
customers, including in the case of an employee, tips received 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. The final regulations also clarify that, for the
purposes of section 224, cash tips also include amounts paid in foreign
currency. 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. For purposes of
section 224, cash tips also do not include digital assets as defined in
section 6045(g)(3)(D) and Sec. 1.6045-1(a)(19).
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.'' The final regulations clarify that statements
furnished to a sole proprietorship or a single-member LLC owned by a
tip recipient are considered furnished to the tip recipient owner of
the sole proprietorship or a single-member LLC to which the statement
was issued, regardless of whether the name of the sole proprietorship
or single-member LLC appears as the recipient on the statement.
In addition, 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 final regulations
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 final regulations clarify that the section 224(d)(2)(A) term
``qualified tips'' only includes amounts that are paid by the customer
voluntarily without any impact on the scope or cost of service or any
other consequence in the event of nonpayment, are not the subject of
negotiation, and are determined by the customer. The final 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 final regulations provide that amounts received for
prostitution services and pornographic activity are not included in the
definition of ``qualified tips.'' The final regulations provide that
amounts received by a manager or supervisor through a voluntary or
mandatory tip-sharing arrangement such as a tip pool are not qualified
tips, but amounts received directly by a supervisor or manager for
services provided in the
[[Page 19042]]
course of duties performed in an occupation included on the List of
Occupations that Receive Tips are qualified tips if all other
regulatory requirements are met. The final regulations also clarify
that a payment is not considered a ``qualified tip'' if, based on all
relevant facts and circumstances, the payments represent a
recharacterization of wages or payments for services as tips for
purposes of claiming the deduction under section 224. Furthermore, the
final regulations provide that if the following facts and circumstances
are present, there is an irrebuttable presumption that the amount paid
is a recharacterization of wages, payment for services, or other income
as tips, and therefore cannot be a qualified tip: (A) the employer of
an employee is the payor of a cash tip received by the employee; or (B)
the tip recipient has a direct ownership interest in the payor of a
cash 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 their trade or business minus the sum of their deductions
(other than the deduction for qualified tips) that are allocable to
that trade or business. The final 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 final 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. The final regulations also clarify that a
taxpayer must be issued an SSN, as defined in section 24(h)(7) of the
Code, before the due date of the income tax return (including
extensions) for the calendar year in which the taxpayer is claiming 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 final 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 final 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 final regulations clarify that the phaseout based on
MAGI is applied after applying the $25,000 limit to the deduction.
The final 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 the occupation, illustrative examples of specific occupations that
would be included, and the Standard Occupation Classification (SOC
Code) that is related to the occupation. The final regulations also
clarify that these occupations include individuals acting as assistants
or apprentices to the listed occupations to the extent they perform the
described services.
II. Baseline
The Treasury Department and the IRS have assessed the benefits and
costs of the final regulations relative to a no-action baseline
reflecting anticipated Federal income tax-related behavior in the
absence of these final 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 final 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 Final Regulations
The Treasury Department and the IRS analyzed the economic effects
of the final 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 final regulations are small.
i. List of Occupations That Receive Tips
The final 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 final
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.R. 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
[[Page 19043]]
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 List of Occupations that Receive Tips includes some
occupations, such as cooks and dishwashers, in which individuals may
not interact with customers but reported receiving tip income,
presumably from tip-sharing arrangements with individuals who do
interact with customers. Employees in these occupations have not been
considered to customarily and regularly receive tips under the FLSA. As
discussed above, there are many differences between the specific
language, purpose, and history of the FLSA tip provisions and the
language, purpose, and history of the deduction for qualified tips
under section 224 of the Code.\19\ For instance, while the FLSA
contemplates that an employee must have some level of customer
interaction to ``customarily and regularly'' receive tips,\20\ section
224(d)(3) provides that for purposes of the deduction for qualified
tips under section 224, ``cash tips'' includes both tips received from
customers and, in the case of an employee, tips received under any tip-
sharing arrangement. As a result, occupations in which employees
receive tips from tip-sharing arrangements are considered as having
``customarily and regularly'' received tips for purposes of the
deduction for qualified tips under section 224.
---------------------------------------------------------------------------
\19\ See supra, ``Comments on the Methodology Used to Construct
the List of Occupations that Receive Tips.''
\20\ See Montano v. Montrose Rest. Assocs., 800 F.3d 186, 189-
194 (5th Cir. 2015) (holding that a factfinder could determine that
an employee did not ``customarily and regularly receive tips,''
despite the fact that the employer included him in a tip pool).
---------------------------------------------------------------------------
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, 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
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 did customarily and regularly receive 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 final 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 Code system.\21\
However, the Treasury 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 receives tips. 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. Thus, using the SOC
Code system alone was not sufficient for creating the List of
Occupations that Receive Tips.
---------------------------------------------------------------------------
\21\ 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 Code documents can be found at https://www.bls.gov/soc.
---------------------------------------------------------------------------
For the method that was selected instead of using the SOC Code
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 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 their
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. 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 typos or abbreviations, or taxpayers
may write multiple occupations separated by a comma or a slash mark,
like ``Occupation 1/Occupation 2.'' \22\ These variations in how
taxpayers reported
[[Page 19044]]
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.
---------------------------------------------------------------------------
\22\ 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.R. 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) Code(s)
(Related SOC Code(s)). (As previously described, the List of
Occupations that Receive Tips in Table 1 of the final 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.).'' \23\
---------------------------------------------------------------------------
\23\ Since tips are reported separately from other compensation
for employees but not for the self-employed 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) \24\ 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.
---------------------------------------------------------------------------
\24\ Table A shows statistics based on the Related SOC Code(s),
not on the TTOC, which may differ from the Related SOC Code(s). For
example, the statistics listed under TTOC 506 (Pet and Show Animal
Caretakers) shows the statistics for all taxpayers in the Related
SOC Code 39-2021 (Animal Caretakers), including taxpayers whose
occupations are not included in TTOC 506, such as zookeepers. As
described in the preamble to the proposed regulations, some SOC
Codes were narrowed in the creation of the TTOC occupation. Certain
occupations grouped in the same SOC Code with non-tipped occupations
were segregated from these non-tipped occupations and provided their
own TTOC occupation category. Therefore, the lower percentages for
certain TTOC occupation categories may be because the data on the
percentage of individuals reporting tips is for the wider related
SOC Code, not for the narrower TTOC occupation. In addition, that
data included in Table A reflects only data for employees and does
not provide tipping data for independent contractors. The lack of
representation for tipped independent contractors may skew the
percentage of individuals reporting tips lower in certain
occupations.
---------------------------------------------------------------------------
The table 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, 34.3 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 ``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 code (related SOC 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...... 74.5 34.3 63.5 35-3031
103............... Food or Beverage 30.4 0.1 33.0 35-3041
Servers,
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
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.
[[Page 19045]]
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 6.6 0.1 18.0 13-1121
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 and Show 19.1 0.3 16.2 39-2021
Animal
Caretakers.
507............... Tutors.......... 0.5 * 34.5 25-3041
508............... Nannies and 0.7 * 28.8 39-9011
Babysitters.
509............... Visual Artists.. 3.3 * 28.4 27-1013
510............... Floral Designers 4.3 * 7.4 27-1023
----------------------------------------------------------------------------------------------------------------
Personal Appearance & Wellness
----------------------------------------------------------------------------------------------------------------
601............... Skincare 54.7 0.5 24.4 39-5094
Specialists.
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............... Eyebrow and 53.2 3.0 22.6 39-5012
Eyelash
Technicians.
607............... Makeup Artists.. 13.1 * 14.8 39-5091
608............... Exercise 1.0 * 25.8 39-9031
Trainers and
Group Fitness
Instructors.
609............... Tattoo Artists 11.1 * 15.8 27-1019
and Piercers.
610............... Tailors......... 0.8 * 15.9 51-6052
611............... Shoe and Leather * * * 51-6041
Workers and
Repairers.
----------------------------------------------------------------------------------------------------------------
Recreation & Instruction
----------------------------------------------------------------------------------------------------------------
701............... Golf Caddies.... 8.0 * 27.9 39-3091
702............... Self-Enrichment 1.9 * 7.5 25-3021
Teachers.
703............... Recreational and * * * 53-2012
Tour Pilots.
704............... Tour Guides..... 14.2 * 17.1 39-7011
705............... Travel Guides... 13.3 * 16.2 39-7012
706............... Sports and 1.9 * 7.5 25-3021
Recreation
Instructors.
----------------------------------------------------------------------------------------------------------------
[[Page 19046]]
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
810............... Gas Pump 0.7 * 15.4 53-6031
Attendant.
---------------------------------------------------------------------------
Total......... ................ ......... 67.5 \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 Form 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 Form W-2 sometimes
enter an occupation (character string) that does not correspond to the Form 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, December 18, 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 final 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 final
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 receive $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 \25\
received tips on or before December 31, 2024. Thus, prior to reading
the guidance in these final regulations, Employee B might have been
unsure whether their occupation as a makeup artist makes them eligible
to claim the deduction for their 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 all other requirements to claim the deduction are satisfied).
---------------------------------------------------------------------------
\25\ Initial drafts of the OBBBA legislation contemplated a
deduction for tips received by individuals in occupations that
traditionally and customarily receive tips, but this language was
later revised to refer to occupations that customarily and regularly
receive 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 final 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.
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. They receive $10,000 in tips during the year
while serving
[[Page 19047]]
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 final regulations
clarify that the definition of ``qualified tips'' excludes tips
received while performing services that violate the applicable law,
Employee C is aware that their $10,000 in tips received while serving
alcohol without a license are not qualified tips, and so they cannot
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 final 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 their
$10,000 in tips are considered ``qualified tips'' and they can claim
the deduction accordingly.
The clarification in the final 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 final 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 final 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 final
regulations would be small.
II. Paperwork Reduction Act
This final 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 final
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 regulations do not impose any new requirements on
small entities but rather provide to 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.
One commenter asked that the final regulations take special account
of the needs of small businesses and that the final regulations not
certify that the rule will not have a significant impact on a
substantial number of small entities if the final regulations provide
details concerning recordkeeping or other obligations of employers.
These final regulations do not provide information or instructions
concerning the recordkeeping and other obligations of employers and for
this reason they have been certified not to have a significant impact
on a substantial number of small entities.
IV. Section 7805(f)
Pursuant to section 7805(f) of the Code, the proposed regulations
were submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on their impact on small business. No
comments were received.
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 final 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 final regulations do not have
federalism implications,
VII. Congressional Review Act
Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.),
the Office of Information and Regulatory Affairs designated this rule
as a major rule, as defined by 5 U.S.C. 804(2).
[[Page 19048]]
Drafting Information
The principal author of these final regulations is the Office of
Associate Chief Counsel (Employee Benefits, Exempt Organizations and
Employment Taxes). However, other personnel from the Treasury
Department and the IRS participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, the Treasury Department and the IRS 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:
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. Add Sec. 1.224-1 under the undesignated center heading
``Additional Itemized Deductions for Individuals'' 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) of the
Code 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 for the taxable year increased by
any amount excluded from gross income under section 911, section 931,
or section 933 of the Code.
(3) Examples. The following examples illustrate the rules of
paragraphs (b)(1) and (2) of this section.
(i) 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 is further
reduced under section 224(b)(2) by $5,000 ($100 x 50), from $25,000 to
$20,000.
(ii) Example 2. Employee B satisfies all the requirements under
section 224 and Employee B's filing status for 2025 is single. B
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. B's modified adjusted gross income for 2025 is $180,000. B's
deduction is reduced (but not below zero) by $100 for each $1,000 by
which B's modified adjusted gross income exceeds $150,000 (the
threshold for a single filer). B's modified adjusted gross income
exceeds $150,000 by $30,000. To calculate the deduction, B first
divides $30,000 by $1,000 to get 30. Thus, B's deduction under section
224(b)(2) is reduced by $3,000 ($100 x 30), from $10,000 to $7,000.
(iii) Example 3. Taxpayers C and D are married, as defined in
section 7703 of the Code, 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, and satisfy all other requirements
under section 224. C receives $15,000 in qualified tips in 2025, and D
receives $20,000 in qualified tips in 2025. Since the combined amount
of their qualified tips is greater than the $25,000 limitation in
paragraph (b)(1) of this section, the total qualified tip amount is
first reduced from $35,000 to $25,000. C and D's modified adjusted
gross income for 2025 is $200,000. Since this amount is less than the
$300,000 modified joint adjusted gross income threshold for joint
filers, the limitation in paragraph (b)(2) of this section does not
apply and no further reduction in the qualified tip amount is
necessary.
(c) Qualified tips defined--(1) In general. Subject to the
requirements in this paragraph (c), 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 (h) of
this section.
(2) Cash tips defined. For purposes of paragraph (c)(1) of this
section, cash tips are tips received, directly or indirectly, from
payors, as defined in paragraph (c)(5) of this section, including, in
the case of an employee, tips received 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. For purposes of this paragraph (c)(2), cash tips
also include amounts paid in foreign currency. 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. For purposes of this paragraph (c)(2), cash tips also do not
include digital assets as defined in section 6045(g)(3)(D) of the Code
and Sec. 1.6045-1(a)(19).
(3) Tips defined. For purposes of paragraph (c)(2) of this section,
tips are amounts paid by payors, as defined in paragraph (c)(5) of this
section, 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. Superficial or nominal
tokens of appreciation from the tip recipient that are negligible in
value, such as a written message of thanks sent to the recipient or
publicly displayed, do not alter the nature of the contribution as a
qualified tip.
(4) Amounts must be paid voluntarily. Amounts are qualified tips
only to the extent they are paid voluntarily and without any
consequence in the event of nonpayment (including any impact on the
scope or cost of service), are not the subject of negotiation, and are
[[Page 19049]]
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 (i.e., the
payor's) bill by the vendor or establishment are not qualified tips,
even if the amounts are subsequently distributed to employees. Any
amount voluntarily paid in excess of such mandatory amounts is a
qualified tip if all other requirements for a qualified tip under this
section are met. If a customer is expressly provided an option to
disregard or modify amounts (including to zero) added to a bill, such
amounts are not mandatory amounts.
(5) Payor defined. For purposes of this section, ``payor'' means
the ultimate recipient of the services. In most cases, this is the
customer, client, or other service recipient. An entity, such as an
employer, a third party settlement organization, or a sole
proprietorship or single-member limited liability company through which
a tip recipient is doing business, that acts as conduit to remit a tip
initially paid by a customer, client, or service recipient to the tip
recipient, is not a payor of the tip for purposes of this section.
(6) 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.
(7) 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.
(8) Prostitution. Any amount received for prostitution services is
not a qualified tip.
(9) Pornography. Any amount received for pornographic activity is
not a qualified tip.
(10) Managers and Supervisors. Amounts received by a manager or
supervisor through a voluntary or mandatory tip-sharing arrangement
such as a tip pool are not qualified tips. However, amounts received
directly by a supervisor or manager for services they provided in the
course of duties performed in an occupation that customarily and
regularly received tips on or before December 31, 2024, as provided in
paragraph (h) of this section, are qualified tips if all other
requirements of this section are met.
(11) Anti-abuse. An amount is not a qualified tip if, based on all
relevant facts and circumstances, such amount represents a
recharacterization of wages or payments for goods or services as tips
for purposes of claiming the deduction.
(i) Facts and circumstances that may indicate a recharacterization
of wages, payment for services, or other income as tips include the
following:
(A) A charge for services shown on an invoice is less than the
payment from the payor shown on a related receipt or information
return, and the cash tip reported on the receipt or information return
is in an amount that approximates the difference between the charge
amount shown on the invoice and payment amount on the receipt or
information return; or
(B) A significant shift in historical tipping or payment practices
between the payor and the tip recipient.
(ii) When the following facts and circumstances are present, there
is an irrebuttable presumption that the amount paid is a
recharacterization of wages, payment for services, or other income as
tips, and therefore cannot be a qualified tip:
(A) The employer of an employee is the payor, as defined in
paragraph (c)(5) of this section, of a cash tip received by the
employee; or
(B) The tip recipient has a direct ownership interest in the payor,
as defined in paragraph (c)(5) of this section, of a cash tip. For
purposes of this paragraph (c)(11)(ii)(B), an ownership interest means
in the case of a corporation, ownership (by vote or value) of five
percent or more of the stock in such corporation; in the case of a
partnership, ownership of five percent of the profits interest or
capital interest in such partnership, or in any other case, ownership
of more than five percent of the beneficial interests in the entity. An
ownership interest is tested as of the date the tip is received. For
purposes of this paragraph (c)(11)(ii)(B), an ownership interest is a
direct ownership interest if it is an ownership interest held directly
by the tip recipient or if it is an ownership interest held through an
entity disregarded as separate from its owner for Federal income tax
purposes; an ownership interest held through a qualified subchapter S
subsidiary as defined in section 1361(b)(3) of the Code; an ownership
interest held through a grantor trust (under subpart E of part 1 of
subchapter J of charter 1 of the Code); or an ownership interest held
through a custodian, broker, nominee, agent, or other similar
intermediary.
(12) Examples. The following examples illustrate the rules of this
paragraph (c). Unless otherwise indicated, each example assumes that
other requirements for claiming the deduction under section 224 are
satisfied and that references to a customer are references to a payor,
as defined in paragraph (c)(5) of this section.
(i) 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.
(ii) Example 2. The facts are the same as in paragraph (c)(12)(i)
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)(12)(i) 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.
(iii) 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
[[Page 19050]]
disregard or modify the ``recommended 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.
(iv) 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. The result would be
the same if Customer F were instead prompted with a tip slider that
could reduce the tip down to zero; if the tip slider was subject to a
minimum floor amount, only amounts above that floor could constitute a
qualified tip.
(v) Example 5. The facts are the same as in paragraph (c)(12)(iv)
of this section (Example 4), but the only 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 F was not
expressly provided an option to disregard or modify the amounts
presented. Customer F 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.
(vi) Example 6. The facts are the same as in paragraph (c)(12)(v)
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.
(vii) 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. Self-employed Painter
G can only deduct the 10% cash tip, however, to the extent the other
requirements of the statute are met, including that the 10% cash tip is
included on a Form 1099 that Painter G receives.
(viii) 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. Shuttle Driver S can deduct the tip,
however, only to the extent the other requirements of the statute are
met, including that the tip is included on an information return
furnished to Shuttle Driver S, or properly reported by Shuttle Driver S
on Form 4137.
(ix) Example 9. The facts are the same as in paragraph
(c)(12)(viii) of this section (Example 8) except the terms of the
contract state that Shuttle Driver S will drive Customer Q to the
airport for $60 and that a recommended 15% tip will be added to the
total cost on the bill for convenience. The contract further states
that the payment of this recommended tip is subject to the complete
discretion of Customer Q and may be increased, decreased or eliminated
entirely by Customer Q. After arriving at the airport, Customer Q pays
Shuttle Driver S the $60 and decides to include the recommended 15%
tip. The 15% gratuity is a qualified tip because Customer Q had the
option to change the tip amount and the option to leave no tip amount
at all, with no consequence to the services provided or the cost of the
service.
(x) Example 10. 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.
(xi) Example 11. Digital Content Creator H is self-employed and
provides training videos on crafting artificial intelligence-created
image prompts. These videos are housed on a digital platform accessible
through web browsers and a mobile app. H's longer and more complex
training videos are locked from public viewing, and users of the
digital platform can gain access to these training videos only after
paying a $5 contribution to H's digital platform account, the full
amount of which is passed on by the digital platform to H. Because the
$5 contribution is required to access H's content, this amount is not a
qualified tip but rather a payment for services provided, which in this
case is the training video. Customer J pays the required $5
contribution and watches
[[Page 19051]]
the training video. Customer J is so satisfied with the content of the
training video that Customer J sends an additional $2 contribution to
H's account as a token of appreciation. Because J's $2 contribution was
not required to access H's content, the $2 contribution is a qualified
tip for purposes of the deduction under section 224.
(xii) Example 12. Digital Content Creator K is self-employed and
live streams cooking videos on a digital platform. K's live streams are
available for free to all users of the digital platform. Viewers of the
live stream can send comments to K during the live stream, which are
displayed in a ``chat'' window during the live stream. In addition,
viewers of K's live streams have the option to contribute a tip, along
with a comment of appreciation, to K's digital platform account during
a live stream. Viewers that contribute a tip will have their
contribution and comment displayed prominently in the chat window. In
addition, K occasionally thanks contributors personally during the live
stream. Because these contributions are not required to access K's
content and because the contributions are voluntarily provided, these
contributions are qualified tips for purposes of the deduction under
section 224. Superficial or nominal digital tokens of appreciation from
the tip recipient that are negligible in value, such as highlighting a
contribution and comment in a chat window or personally thanking the
contributor, do not alter the nature of the contribution as a qualified
tip.
(xiii) Example 13. Manager M is a restaurant manager at a
restaurant. Customer N dines at the restaurant and is dissatisfied with
the quality of the meal provided. Manager M listens to Customer N's
complaint about the meal quality and provides resolution in the form of
a discounted meal and a gift card. Customer N is very satisfied with
Manager M's handling of the situation and leaves a $5 tip specifically
for Manager M. Because Manager M received the tip while performing the
duties of a restaurant manager when providing service to Customer N,
and because restaurant manager is not an occupation that is included in
the table of Occupations that Customarily and Regularly Received Tips
on or Before December 31, 2024, provided in paragraph (h) of this
section, the $5 tip paid by Customer N to Manager M is not a qualified
tip.
(xiv) Example 14. The facts are the same as in paragraph
(c)(12)(xiii) of this section (Example 13). Manager M occasionally
performs duties as wait staff for the restaurant when the restaurant is
crowded. Customer P dines at the restaurant and is waited on by Manager
M. When Customer P pays the bill, Customer P pays Manager M a $5 tip.
Tips are not pooled at this restaurant. Because Customer P's tip was
paid directly to Manager M while Manager M was performing the duties of
wait staff, and because wait staff is an occupation that is included in
the table of Occupations that Customarily and Regularly Received Tips
on or Before December 31, 2024, provided in paragraph (h) of this
section, the $5 tip paid by Customer P to Manager M is a qualified tip.
(d) Qualified tips must be reported on an information return--(1)
In general. Except as provided in paragraph (d)(2) of this section, in
order to be eligible for the deduction under section 224, qualified
tips must be included in the amount of cash tips that are separately
reported on a statement furnished to the taxpayer pursuant to section
6041(d)(3), section 6041A(e)(3), section 6050W(f)(2), or section
6051(a)(18), or reported by the taxpayer on Form 4137 (or successor).
(2) Transition rule for tax year 2025. In order to be eligible for
the deduction under section 224 for taxable years beginning before
January 1, 2026, qualified tips must be included in the aggregate
amount reported on a statement furnished to the taxpayer pursuant to
section 6041(d)(3), section 6041A(e)(3), section 6050W(f)(2), or
section 6051(a)(18), or reported by the taxpayer on Form 4137 (or
successor), but cash tips do not need to be separately reported on the
statement.
(3) Statements furnished to certain entities. Statements furnished
to a sole proprietorship or a single-member LLC that does not elect to
be treated as a corporation for income tax purposes owned by a tip
recipient are considered to be furnished to the tip recipient owner of
the sole proprietorship or single-member LLC to which the statement was
issued, regardless of whether the name of the sole proprietorship or
single-member LLC appears as the recipient on the statement.
(e) 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 (e)(1) of this section.
(i) 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.
(ii) Example 2. Manicurist O is self-employed and owns a nail
salon. Manicurist O has no other employment. For the taxable year,
Manicurist O 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 O's total deductible expenses (other than the deduction for
qualified tips) are $60,000. Manicurists O'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 O received $20,000 in qualified tips, Manicurist O is
allowed a qualified tip deduction of only $15,000, which is the extent
to which Manicurist O'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.
(f) 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. The SSN, as
[[Page 19052]]
defined in section 24(h)(7) of the Code, must have been issued before
the due date of the income tax return (including extensions) for the
calendar year in which the taxpayer is claiming the deduction under
section 224.
(2) Married taxpayers. Taxpayers who are married, as defined by
section 7703, 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.
(g) [Reserved]
(h) Occupations that customarily and regularly received tips on or
before December 31, 2024. The occupations in table 1 to this paragraph
(h) customarily and regularly received tips on or before December 31,
2024. Individuals serving as assistants or apprentices in an occupation
are included in that occupation category if they perform the same
services as those listed in the occupation description. Subject to the
requirements in section 224 and this section, only qualified tips
received in connection with the occupations listed in table 1 to this
paragraph (h) are eligible for the deduction in section 224(a).
Table 1 to paragraph (h)--Occupations That Customarily and Regularly Received Tips on or Before December 31,
2024
----------------------------------------------------------------------------------------------------------------
Treasury Tipped Related standard occupational
Occupa- tion Code TTOC occupation TTOC occupation TTOC illustrative classification code (related
(TTOC) title description examples SOC code) \1\
----------------------------------------------------------------------------------------------------------------
Beverage and Food Service
----------------------------------------------------------------------------------------------------------------
101.............. Bartenders......... Mix and serve Barkeep, 35-3011
drinks or other mixologist,
refreshments to taproom attendant,
patrons, directly sommelier.
or through
waitstaff.
102.............. Wait Staff......... Take orders and Cocktail waitress, 35-3031
serve food and dining car server,
beverages to banquet staff.
patrons at tables
in dining
establishments or
at catered events.
103.............. Food or Beverage Serve food or Room service food 35-3041
Servers, Non- beverages to server, boat hop,
restaurant. individuals beer cart server.
outside of a
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, 35-2013, 35-
participate in the pastry chef, sous 2014, 35-2019
preparation, chef, fast food
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, 35-9099
Workers. of food sandwich maker,
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,
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 19053]]
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, doorman.
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, 49-9099, 49-
and Repair Workers. keep machines, window repairer, 9063, 49-2097, 51-7021
mechanical house painter
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 19054]]
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, at
a daytime
nonresidential
facility, or a
residential
facility.
502.............. Private Event Coordinate Wedding planner, 13-1121
Planners. activities of party planner.
staff or clients
to make
arrangements for
private events.
May provide
creative design
for d[eacute]cor
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, 21-2011
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 and Show Animal Feed, water, groom, Pet groomer, pet 39-2021
Caretakers. bathe, exercise, sitter, pet
or otherwise walker, kennel
provide care to worker, pet
promote and trainer, horse
maintain the well- groomer.
being of pets or
show animals.
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.
509.............. Visual Artists..... Create original Ice sculptor, 27-1013
visual artwork caricature sketch
using any of a artist.
wide variety of
media and
techniques.
510.............. Floral Designers... Design, cut, and Corsage maker, 27-1023
arrange live, florist, flower
dried, or arranger, event
artificial flowers florist.
and foliage.
----------------------------------------------------------------------------------------------------------------
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 and Eyelash Enhance and Eyebrow waxer...... 39-5012
Technicians. maintain clients'
eyebrows using
techniques such as
threading, waxing,
or tweezing.
Enhance clients'
eyelashes using
techniques such as
tinting or
applying
extensions.
[[Page 19055]]
607.............. Makeup Artists..... Design and apply Wedding makeup 39-5091
makeup looks. artist, party
makeup artist.
608.............. Exercise Trainers Instruct or coach Aerobics trainer, 39-9031
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.
609.............. Tattoo Artists and Design and execute Tattoo artist, ear 27-1019
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, 51-6052
alter, repair, or clothing
fit garments. alterations worker.
611.............. Shoe and Leather Construct, Cobbler, shoe 51-6041
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 53-2012
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 (covering
both indoor and
outdoor locations).
706.............. Sports and Teach or instruct Diving instructor, 25-3021
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 platform/app-based
passengers on a rideshare driver.
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 to driver, grocery
deliver goods, delivery driver,
such as food floral delivery,
products, bicycle courier,
appliances, or package delivery
furniture, or pick person, appliance
up or deliver delivery driver,
packages. May also furniture delivery
take orders or person, app/
collect payment at platform-based
point of delivery. delivery person.
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.
[[Page 19056]]
810.............. Gas Pump Attendant. Pump gas for Gas pumper......... 53-6031
customers at a gas
station. May also
clean the
windshield, check
the oil level, or
check the tire
pressure of the
customer's car in
conjunction with
the car being
refueled.
----------------------------------------------------------------------------------------------------------------
1. The ``Related Standard Occupational Classification Code (Related SOC Code)'' is the code 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).
(i) Termination. No deduction shall be allowed under this section
for any taxable year beginning after December 31, 2028.
(j) Applicability date. This section applies to taxable years
beginning after December 31, 2024.
Frank J. Bisignano,
Chief Executive Officer.
Approved: February 17, 2026.
Kenneth J. Kies,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2026-07104 Filed 4-10-26; 8:45 am]
BILLING CODE 4831-GV-P