The "No Tax on Tips" Who Qualifies
- chimeinconsults2
- Jan 1
- 2 min read
If you or someone you know works in the service industry, tax season just got a lot more interesting. As you may have heard, the new "No Tax on Tips" law is officially in effect for 2025 tax returns.
This is a massive opportunity to keep more of your hard-earned money, but the IRS has very specific rules on who qualifies. As your Enrolled Agent, I want to make sure you don't miss out.
Are You on the List?
The Treasury Department has grouped eligible jobs into eight categories. If your occupation falls here, you may be eligible:
Food & Beverage (Waiters, Bartenders, Baristas)
Entertainment (Dealers, Musicians, Ticket Takers)
Hospitality (Bellhops, Housekeeping, Concierges)
Home Services (Landscapers, House Cleaners, Movers)
Personal Services (Wedding Planners, Pet Groomers)
Wellness (Barbers, Stylists, Massage Therapists)
Recreation (Caddies, Tour Guides, Instructors)
Transportation (Rideshare Drivers, Valets, Delivery)
Does Your Cash Count?
Not all money received counts as a "Qualified Tip." To claim the deduction, the tip must be:
✅ Voluntary: Freely given by the customer (no negotiation).
✅ Cash or Equivalent: Cash, credit/debit, or apps like Venmo (crypto doesn't count).
✅ Received via Tip Pool: Money from a shared jar or pool is okay!
⚠️ Important Warning: Mandatory "Service Charges" (like an auto-added 18% for large groups) generally do not qualify as tips under this new rule.
Let’s Maximize Your Refund
There are specific caps ($25,000 limit) and income phase-outs to be aware of. Navigating these new codes can be tricky, and claiming them incorrectly could trigger an audit.
We are here to help. We are currently scheduling appointments for the upcoming filing season. Let's sit down and ensure you claim every dollar you are entitled to.
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