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ARTICLE · 15 OCTOBER 2025

Don't Tax My Tips! How It Works

Dykema Gossett PLLC
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On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (the "OBBBA"), which added Section 224 to the Internal Revenue Code.

United StatesTax
Nardeen Dalli
Nardeen Dalli
Emily Jacobs
Emily Jacobs

Takeaways

  • The IRS has proposed new regulations clarifying which tipped occupations can deduct their tips from income under the One Big Beautiful Bill Act.
  • Employees in 68 occupations may qualify for this limited-time federal income tax deduction.
  • The deduction is capped at $25,000 annually and phases out for higher earners, with joint filers required to meet specific eligibility rules.

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (the "OBBBA"), which added Section 224 to the Internal Revenue Code. This new section allows employees in occupations that regularly receive qualified tips to deduct those tips from their gross income when calculating federal income tax liability for taxable years beginning after December 31, 2024, and before January 1, 2029. The OBBBA directed the Secretary of the Treasury to publish a list of occupations that "customarily and regularly" receive tips to help taxpayers determine the

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