The Trump administration recently released a preliminary list of professions qualifying for a tax deduction on tips, a provision of the One Big Beautiful Bill Act. This deduction, initially promised by President Trump during his campaign, aims to benefit workers who regularly receive tips.
The list, initially reported by Axios and confirmed by the Treasury Department to MarketWatch, is extensive. It includes expected categories like food service and hospitality, but also expands to less conventional professions.
The inclusion of surf instructors, clowns, and golf caddies highlights the broad interpretation of “customarily and regularly” receiving tips. Other occupations on the list include handymen, plumbers, landscapers, and ride-sharing drivers. Even digital content creators, such as streamers and podcasters, are included.
Dave Kautter, a former acting Internal Revenue Service commissioner, commented on the breadth of the list, suggesting a deliberate effort towards inclusivity rather than strict limitation. He noted the challenge of balancing inclusivity with accurate tax reporting.
The list also includes various entertainment professionals, such as magicians, street performers, and wedding planners. Personal appearance and wellness categories encompass pet groomers, yoga instructors, and even certain types of dancers. One tax accountant specializing in adult entertainment expressed optimism about the inclusion of adult dancers.
Katherine Studley, owner of Only Consultant and Prisma Tax Group, observed that the inclusion of adult entertainers is logical given tipping practices in that industry. However, she raised concerns about strip clubs adhering to reporting requirements.
The Treasury Department and the IRS have a deadline of early October to finalize the list. Individuals in eligible professions earning under the income limits ($150,000 for individuals, $300,000 for married couples) must still report their tips on their 2025 tax returns.
Scott Klein, senior manager for tax policy and advocacy at the American Institute of CPAs, welcomed the released list but highlighted the need for further clarification. He pointed out ambiguities concerning the reporting of tips by employers and the designation of qualified professions on tax forms.
Kautter emphasized the ongoing need for clarity on reporting rules. He advised self-employed individuals to maintain detailed records of their earnings, including dates, times, and amounts received. He suggested a reasonable estimation for the first half of the year for those who begin detailed record-keeping after the list’s release.
While the One Big Beautiful Bill Act was signed into law in July, the need for accurate record-keeping remains crucial for those seeking to claim the tip deduction. The IRS is working on modifying tax forms to facilitate the claiming process. Tax professionals and employers alike await further guidance from the IRS and Treasury Department.
Related
