When Congress passed the “no tax on tips” deduction in July 2025, one of the biggest questions both employees and employers had was simple: who exactly qualifies?
For years, tipped income has been subject to the same federal taxes as regular wages, leaving many employees in industries like hospitality, food service, and entertainment asking when a tax relief would come their way.
Now, the IRS has released a preliminary list of eligible occupations that can benefit from this new deduction, providing clarity on which jobs will see a change.
In this blog, we’ll highlight which jobs qualify, the impact on employers, and provide the full list of occupations covered under the “no tax on tips” deduction. For those looking for further insight into the broader legislation, we’ve also put together an FAQ on the employer impact of the One Big Beautiful Bill, which explores how this may impact employers at large.
The new “no tax on tips” deduction means employees who customarily and regularly earn tips will be eligible for a tax deduction on their federal income tax return for that portion of their wages. The U.S. Treasury has now published a preliminary list of 68 occupations across eight industries that qualify.
The U.S. Treasury Department has published a preliminary list of occupations that customarily and regularly receive tips. This list of occupations will be able to benefit from the new "no tax on tips" tax break passed by Congress in July. The list is separated into eight categories broken down by occupation.
Employers need to ensure they are tracking and reporting tips appropriately. However, no immediate action is needed by employers or CoAdvantage with this latest update from the IRS.
The Treasury Department's preliminary list includes 68 occupations across 8 industries:
The "no tax on tips" deduction represents a major shift for employees who rely on gratuities, and while the IRS has provided an initial list of eligible occupations, additional guidance is expected in the months ahead. For now, employers don't need to take immediate action, but staying informed of potential payroll and compliance updates is crucial.
CoAdvantage is here to help employers navigate these changes. Our team of experts monitors legislative changes and ensures you're prepared when new legislation takes effect, while also helping you communicate clearly with your employees.
Contact us today to learn how our HR and payroll expertise can help your business grow and stay ahead of evolving regulations.
**The information provided on this website is for general informational purposes only and does not constitute legal advice. While we strive to ensure the accuracy and completeness of the information, we make no guarantees about its correctness, completeness, or applicability to your specific circumstances. Laws and regulations are subject to change, and you should consult a qualified legal professional before making any decisions based on the information provided here.