OBBBA adds a temporary, targeted deduction for tips. It is not a universal no tax on tips. Many tipped amounts are still taxable, and payroll taxes still apply.
Here is the clean, CFO-level breakdown:
Who can claim the deduction
For tax years 2025 through 2028, the tips deduction is available to:
- Employees in occupations that customarily and regularly received tips before 2025
- Self-employed individuals in those same occupations
- Provided they have a work-eligible Social Security number and, if married, file jointly
The IRS is publishing a qualifying occupations list. Examples likely to qualify include:
- Restaurants: servers, bartenders, hosts, food runners, counter staff; in some states, kitchen workers who participate in valid tip pools
- Hospitality: bellhops, valets, concierges, housekeeping, doormen
- Personal care: hairstylists, barbers, nail technicians, tattoo artists, body and spa workers, massage therapists
- Transportation: taxi and rideshare drivers; delivery drivers
- Other services: baristas, dog groomers, casino dealers, golf caddies, tour guides
Not eligible: Workers in SSTBs for QBI purposes and employees of SSTB employers, including health, law, accounting, performing arts, athletics, consulting, financial advisory, investment and wealth management, actuarial, and trading services. In short, professionals cannot convert fees to tips to claim an extra deduction.