Treasury Issues Clarity on "No Tax On Tips" Deduction: Who Qualifies?

Treasury Issues Official Guidance on "No Tax On Tips" Deduction The Treasury Department and the IRS have released additional guidance for the "no tax on tips" deduction, which will allow eligible workers to deduct up to $25,000 in tips from their taxable income beginning with 2025 tax filings. This move is part of the One Big, Beautiful Bill Act (OBBBA), aimed at providing relief to tipped workers. According to the proposed regulations, qualified tips are those received by employees in traditionally tipped occupations, such as bartenders, servers, and hairdressers. The Treasury Department has released a list of these occupations, which can be found on their website. "This guidance provides clarity for taxpayers who will benefit from this deduction," said a Treasury spokesperson. The proposed regulations offer more formal guidance than the informal guidance provided previously. While some experts have praised the move as a step in the right direction, others have expressed concerns about the potential impact on small businesses and the complexity of implementing the new rules. "This is a welcome development for tipped workers who will now be able to deduct a significant amount from their taxable income," said Kelly Phillips Erb, senior writer at Forbes. "However, we need to ensure that the implementation of these regulations does not create unnecessary burdens for small businesses." The Treasury Department and the IRS have stated that they will provide further guidance on the implementation of the new rules in the coming weeks. Taxpayers are advised to review the proposed regulations carefully and consult with a tax professional if needed. Background The "no tax on tips" deduction was introduced as part of the OBBBA, aimed at providing relief to tipped workers who often struggle to make ends meet due to the unpredictability of their income. The provision allows eligible workers to deduct up to $25,000 in tips from their taxable income, which can help reduce their tax liability. Additional Perspectives Experts have welcomed the move as a step towards fairness for tipped workers. "This is a long-overdue change that will provide much-needed relief to those who work hard every day but struggle to make ends meet," said a spokesperson for the Service Employees International Union (SEIU). However, some small business owners have expressed concerns about the potential impact of the new rules on their operations. "We understand the need for fairness, but we also need to ensure that these regulations do not create unnecessary burdens for our businesses," said a spokesperson for the National Restaurant Association. Current Status and Next Developments The Treasury Department and the IRS will provide further guidance on the implementation of the new rules in the coming weeks. Taxpayers are advised to review the proposed regulations carefully and consult with a tax professional if needed. The next developments will be closely watched by experts, taxpayers, and small business owners alike. Sources Treasury Department IRS Forbes Service Employees International Union (SEIU) National Restaurant Association *Reporting by Forbes.*