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The U.S. Department of the Treasury in August released a preliminary list of 68 occupations that may be eligible for President Donald Trump’s “no tax on tips” deduction.
But some jobs from the list ultimately may not qualify, experts say.
Both parties floated “no tax on tips” during the 2024 presidential campaign, and Republicans enacted the measure via their “big beautiful bill” in early July.
The provision allows certain workers to deduct up to $25,000 of “qualified tips” yearly from 2025 to 2028. The tax break phases out, or gets smaller, once modified adjusted gross income exceeds $150,000.
But “a lot of people will be surprised to find out that not every single occupation on [the Treasury list] is going to actually be eligible for the deduction,” said Ben Henry-Moreland, a certified financial planner with advisor platform Kitces.com.
As required by Trump’s legislation, the Treasury’s list included jobs that “customarily and regularly received tips” on or before December 31, 2024.
But there is a second test to qualify for the “no tax on tips” deduction, experts say. Your job can’t be a so-called “specified service trade or business,” or SSTB, which includes categories like health care, legal, financial services, performing arts and more. Trump’s 2017 legislation outlined the list of SSTBs to limit eligibility for a 20% deduction for certain businesses.
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The Treasury’s preliminary list came about a month before the Oct. 2 occupation list deadline set in the bill.
Experts agree that further clarification is needed for which occupations qualify for the tax break, especially how the list of tipped jobs will interact with the specified service trade or business limitations.
“The question is, how will [Treasury] structure the regulation to navigate these complexities?” said Thomas Gorczynski, a Tempe, Arizona-based enrolled agent, which is a tax license to practice before the IRS.
Who qualifies for the tax break remains unclear
Experts agree that the SSTB list could suggest which jobs or professionals may not qualify for the tax break. But in practice, it may not be so straightforward.
Eligibility can depend on the kind of employment, whether you’re a W-2 worker or a self-employed contractor.
“You can get tips through one and you qualify, but maybe not the other for doing the same thing,” said Gorczynski, who is also an educator on federal taxes.
For instance, a self-employed esthetician might not fall under the health SSTB category because they’re not providing medical services, he said.
But if they do their work in a dermatology office, they work for a specified service trade or business, rendering the esthetician ineligible for the tax break, Gorczynski said.
On the flip side, a self-employed lounge singer might fall under the SSTB category of the performing arts. Any tips the self-employed singer earns are disqualified for the tax break.
Yet, if they are a lounge singer employed by a casino or restaurant, they are not working for a specified service trade or business, and therefore may qualify for the tax break, said Gorczynski.