Tax-Free Tip Guidance
Thanks to the One Big Beautiful Bill Act (OBBBA), up to $25,000 in tips may be earned free of income taxes (Social Security taxes will still have to be paid). The IRS has issued a preliminary list of 68 occupations that customarily received tips as of December 31, 2024; these are the eligible occupations for the new tax benefit.
The 68 occupations are grouped into these eights categories:
- Beverage & Food Service
- Entertainment & Events
- Hospitality & Guest Services
- Home Services
- Personal Services
- Personal Appearance & Wellness
- Recreation & Instruction
- Transportation & Delivery
The list is not final, but major changes are not expected to be made. However, the guidance also includes fields that are excluded from tax-free tip treatment. These include health, performing arts, and athletics.
See your tax advisor to learn more, if you think your tax liability may be affected by the change.
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