Overview

• The IRS set an October 23 deadline for public comments on its proposed list of qualifying occupations for the temporary tip deduction.
• The deduction allows up to $25,000 of qualified tips to be excluded from federal taxable income for 2025–2028, with phaseouts starting at $150,000 for single filers and $300,000 for joint filers.
• Qualified tips are voluntary customer payments made in cash or cash-equivalents, including cards, mobile payments, checks, gift cards, and tokens such as casino chips, while automatic service charges and payments tied to illegal activity are excluded.
• The list is organized under a Treasury Tipped Occupation Code across eight sectors and includes some less typical tipping roles such as dishwashers, cooks, plumbers, and electricians.
• Tips remain subject to payroll and state/local taxes, and a Tax Policy Center estimate suggests about 2.6% of taxpayers would benefit from the deduction.