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President Donald Trump’s “no tax on tips” deduction offers financial planning opportunities for some workers. But it’s too soon to execute those strategies, experts say.
Enacted via Trump’s “big beautiful bill,” the “no tax on tips” provision allows certain workers to deduct up to $25,000 in “qualified tips” per year from 2025 through 2028.
The U.S. Department of the Treasury in August released an early list of 68 occupations that “customarily and regularly received tips” as of year-end 2024. But some of those jobs ultimately may not qualify.
If your occupation appears in the preliminary list, “my big recommendation right now is to not make any major moves,” said Thomas Gorczynski, a Tempe, Arizona-based enrolled agent, which is a tax license to practice before the IRS.
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Experts expect further details from the Treasury and IRS should come by early October, but the exact timing remains unclear.
“We still need a lot more guidance,” said Melanie Lauridsen, vice president of tax policy and advocacy with the American Institute of Certified Public Accountants.
Otherwise, tax professionals may not have enough information on hand to help their clients make year-end tax planning decisions.
“It’s when you make the assumptions where it gets a little dangerous,” she said.
Which jobs qualify for ‘no tax on tips’
It’s unclear which jobs from the Treasury’s preliminary list will qualify, experts say.
Some of the occupations from the preliminary list may be eligible for the deduction, others might not.
Your job can’t be a so-called “specified service trade or business,” or SSTB, experts say. Trump’s 2017 legislation outlined the list of SSTBs to limit eligibility for a 20% deduction for certain businesses. The SSTB list includes jobs in health care, legal and financial services, performing arts, sports and more.
What’s more, eligibility may also depend on whether you’re a W-2 worker or are self-employed, according to Gorczynski.
Experts say that further clarification is needed to understand which occupations qualify and how the official list will interact with the SSTBs.
Tax planning opportunities
With key questions about the “no tax on tips” deduction unclear, some workers are at a standstill with year-end planning decisions, experts say.
One planning opportunity could be reducing modified adjusted gross income, or MAGI, to qualify for the deduction, experts say. The tax break on tips phases out, or gets smaller, once MAGI exceeds $150,000.
Another example could include retirement savings. Many self-employed workers make retirement plan contributions, but it’s uncertain whether this move will reduce net business income and limit the tips deduction, Gorczynski said.
“This deduction is going to be a key metric when we’re doing planning for sole proprietor clients,” but experts need further guidance to maximize the overall tax break, he said.
Also, for workers who are in jobs that appear in the preliminary list but don’t interact with the SSTB list, it’s important to “get a grasp of what the law says and what it means,” said Lauridsen.
Sooner rather than later, it may be worth reaching out and consulting with a tax professional or a financial advisor, experts say.