If you earn tips as part of your income, the IRS just gave you a reason to celebrate.
Starting in 2025, thanks to the One Big Beautiful Bill Act (OBBBA), qualifying workers can exclude up to $25,000 in tip income from their taxable earnings each year through 2028.
That means more of your hard-earned money stays in your pocket—and less goes to taxes.
Let’s break down what this new provision means, who qualifies, and how it works.
What the New Tip Income Exclusion Does
Under this new OBBBA rule, individuals who “customarily receive tips” as part of their job can now exclude up to $25,000 of those tips from federal income tax each year between 2025 and 2028.
This exclusion is in addition to other deductions or credits you may already qualify for, and it applies whether you’re a W-2 employee or a self-employed individual reporting tips as part of your gross income.
Key Rules to Know
- The exclusion applies only to **cash and electronic tips**, not service charges or mandatory gratuities.
- You must keep accurate records of all tips received, including those reported to your employer or tracked in your bookkeeping system.
- The IRS will verify qualifying jobs using an official list of recognized occupations that customarily earn tips.
Who Qualifies?
The IRS released a preliminary list of 68 occupations that qualify under this new rule.
If your role regularly includes receiving tips, you may be eligible to exclude up to $25,000 from your taxable income in 2025.
Here’s the full list:
- Bartenders
- Barbers
- Beauticians
- Bellhops
- Bouncers
- Busboys and bussers
- Cab drivers
- Casino dealers
- Caterers
- Chauffeurs
- Cleaning personnel
- Cocktail servers
- Concierges
- Cosmetologists
- Delivery drivers
- Dog groomers
- Door attendants
- Entertainers
- Estheticians
- Event planners
- Exotic dancers
- Food servers
- Golf caddies
- Hairstylists
- Housekeepers
- Hotel attendants
- Makeup artists
- Masseuses and massage therapists
- Musicians
- Nail technicians
- Parking valets
- Personal shoppers
- Pet sitters
- Photographers
- Porters
- Rideshare drivers (Uber, Lyft, etc.)
- Salon assistants
- Servers
- Shoeshine workers
- Spa attendants
- Taxi drivers
- Tattoo artists
- Tour guides
- Ushers
- Valets
- Waiters and waitresses
- Wedding planners
- Wine stewards
- Yoga instructors
- Influencers/content creators receiving tips or gifts from followers
- Streamers or live broadcasters receiving tips or donations
- Baristas
- Bus drivers (charter or private)
- Casino hosts
- Delivery service app drivers
- Dog walkers
- Esthetic spa specialists
- Event hosts or emcees
- Flight attendants
- Golf instructors
- Personal trainers
- Private chefs
- Retail clerks who receive tips
- Street performers
- Stylists (fashion or personal)
- Tattoo shop assistants
- Valet supervisors
- Virtual service providers (remote stylists, virtual trainers, etc.)
How to Claim the Exclusion
For employees, this exclusion will be reflected when you report your total tip income to your employer or on your Form 1040.
If you’re self-employed, you’ll reduce your reported gross receipts by the qualifying exclusion amount, up to $25,000.
You’ll need to maintain documentation—like daily logs or electronic records—to substantiate your claim.
Why It Matters
This rule recognizes how many Americans rely on tips as part of their livelihood. It’s a direct benefit for millions of small business owners, service professionals, and freelancers who earn part of their income through gratuities.
Between now and 2028, this could mean up to $100,000 in total excluded income if you qualify each year—and that can make a big impact on your bottom line.
If you work in an industry where tipping is common, this new OBBBA provision could provide significant tax relief.
Be sure to keep detailed records and talk with your tax professional about how to apply this exclusion correctly for 2025 and beyond.
If you’d like help determining whether your occupation qualifies or how to claim this exclusion, contact us to discuss your tax strategy.