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On September 19th, 2025, the United States Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) released new guidance on the proposed “No Tax on Tips” regulations. Specifically, this deduction is included within the One Big Beautiful Bill Act (Act). In addition to any new laws within the Act that affect employers and employees, businesses must also comply with any similar regulations established by the U.S. Department of Labor (DOL). Basically, wage regulations are governed by the Fair Labor Standards Act (FLSA). The FLSA is one of the most essential labor laws that affects most workplaces. Failure to comply with any labor or employment laws can result in substantial fines and penalties. Earlier this month, the Treasury released a preliminary list of occupations that may be entitled to claim the new “No Tax on Tips” deduction. The September 19 guidance builds on that earlier information.
Overview of the “No Tax on Tips” Regulations
Chiefly, the Act provides an above-the-line tax deduction for “qualified tips.” Specifically, to qualify for the deduction, the tips must (among other conditions) be received by an individual engaged in an occupation that “customarily and regularly received tips” on or before December 31st, 2024. Eventually, under the Act, the Treasury was ordered to publish an official list of qualifying occupations by October 2nd, 2025. The guidance released last week includes that final list of occupations.
Jobs that Fall Under the “No Tax on Tips” Regulations
In anticipation of the new guidance, the IRS has created a branding system called the “Treasury Tipped Occupation Code” (Code). Under this Code, a three-digit code and descriptions for the occupations listed within the proposed regulations were created. The proposed regulations group the occupations into eight categories:
- 100s – Beverage and Food Service
- 200s – Entertainment and Events
- 300s – Hospitality and Guest Services
- 400s – Home Services
- 500s – Personal Services
- 600s – Personal Appearance and Wellness
- 700s – Recreation and Instruction
- 800s – Transportation and Delivery
To view the entire list of occupations, divided up by industries, affected and interested employers should examine the Treasury’s final list.
New Definitions Under the “No Tax on Tips” Regulations
Furthermore, to claim the deduction, a worker must be in an occupation on the list and receive qualified tips. The proposed regulations define qualified and non-qualified tips. According to the IRS, qualified tips must be:
- Paid in cash or an equivalent medium, such as a check, a credit card, a debit card, a gift card, tangible or intangible tokens that are readily exchangeable for a fixed amount in cash, or another form of electronic settlement or mobile payment application (excluding most digital assets) denominated in cash.
- Received from customers or, in the case of an employee, through a mandatory or voluntary tip-sharing arrangement, such as a tip pool.
- Paid voluntarily by the customer and not be subject to negotiation. Qualified tips do not include some service charges. For instance, in the case of a restaurant that imposes an automatic 18% service charge for large parties and distributes that amount to waiters, bussers, and kitchen staff, if the charge is added with no option for the customer to disregard or modify it, the amounts distributed to the workers from it are not qualified tips.
Non-qualified tips include any amount received for illegal activity, prostitution services, or pornographic activity.
Employer Takeaways
In conclusion, the Treasury and the IRS are seeking public comments on the proposed regulations. Those comments can be made within 30 days through Regulations.gov. Most importantly, complete instructions on submitting comments can be found in the proposed regulations. Public comments on the proposed regulations are due by October 23rd, 2025.
