Tax-Free Tips Occupations Finalized…Low-Income Workers Expected to Benefit
Treasury Announces 8 Industries and 68 Eligible Jobs
Up to $25,000 Deduction Through 2028 Tax Year
Restaurant, Beauty, Driving, and Care Workers Included
Wages Could See 10–15% Boost; Better Track Tips Quarterly
The Treasury Department has finalized its list of eight industries and 68 occupations eligible for tax-free treatment of tips, a key pledge of former President Donald Trump.
The “no tax on tips” policy was codified under the recently enacted One Big Beautiful Bill Act (OBBBA), which allows tipped workers to deduct up to $25,000 in annual tip income. The measure will be in effect from 2025 through 2028, subject to extension by Congress.
The Treasury Department spent several months reviewing and classifying occupations before announcing the final list. Jobs include wait staff, cooks and kitchen assistants, caregivers at nursing facilities, housekeepers, personal care aides, beauticians, skincare specialists, and rideshare drivers such as Uber and Lyft.
The policy, highlighted by Trump during his campaign, is aimed at increasing take-home pay for service industry and platform workers who rely heavily on tips. Supporters argue that allowing workers to keep the full value of their tips will boost consumer spending and stimulate the economy, even at the cost of lower federal tax revenues.
Tax experts expect workers in affected industries to see a temporary 10–15% increase in effective wages. However, they warn that underreporting tip income could negatively impact Social Security and Medicare contributions.
“With changes to the W-2 reporting system, some confusion is inevitable, but by next year the policy should be well established,” said CPA Peter Son. “Korean Americans in restaurants, hotels, and driving services—especially lower-income workers—stand to gain the most, but business owners also need to prepare carefully.”
Accountants advise workers to track tip income quarterly and consult with employers and tax professionals to ensure they stay within the new deduction limits.
While OBBBA supporters hailed the measure as a financial relief for millions of tipped workers, critics voiced concerns that the policy disproportionately benefits certain industries and could create complications in tax administration.
The tax-free tips provision is currently set to expire at the end of 2028, unless Congress votes to extend it.
