Who qualifies for a “no tax on tips” deduction? it’s complicated

In August, the US Treasury Department released a reserve list of 68 occupations that could be eligible for President Donald Trump’s “tax-free” deduction.

However, some jobs from the list may ultimately not be qualified, experts say.

The parties raised the idea of ​​”no tax on tips” during the 2024 presidential election, and Republicans enacted the measure through the “Big Beautiful Building” in early July.

This provision allows certain workers to deduct “qualifying tips” of up to $25,000 each year from 2025 to 2028. There is no tax credit stage and adjusted gross income exceeds $150,000.

But “it’s surprising to learn that not all professions (the Ministry of Finance) are actually eligible for the deduction,” says Ben Henry Moreland, a certified financial planner at the advisory platform Kitces.com.

As mandated by Trump’s law, the Treasury list included jobs that were “conventionally and regularly received hints” before December 31, 2024.

But there’s a second test to qualify for a “tax-free” deduction on tips, experts say. Your job cannot be a so-called “specific services trade or business” or SSTB, including categories such as healthcare, legal, financial services, performing arts. Trump’s 2017 law outlined the list of SSTBs to limit eligibility for a 20% deduction for a given company.

The Treasury reserve list was set in the bill about a month before the Occupational List deadline for October 2.

The expert agrees that further explanations will be required to be made which occupations are tax deductibles and how they interact with specified trade of services or business restrictions.

“The question is how we structure regulations to navigate these complexities (the Treasury Department).” Thomas Gorczynski, a registered agent based in Tempe, Arizona, said it’s a tax license to practice before the IRS.

Experts agree that the SSTB list can suggest which employment or experts are not eligible for the tax credit. But in reality, it may not be that easy.

Eligibility can depend on the type of employment, whether it is a W-2 worker or a self-employed contractor.

“You can get hints through one and qualify, but maybe not the other to do the same,” said Gorczynski, a federal tax educator.

For example, self-employed estheticians may not fall into the Health SSTB category because they do not provide medical services, he said.

But if they work in a dermatology office, they work for a specific trade in services or business and cannot adapt estheticians to tax credits, Gorczynski said.

Conversely, self-employed lounge singers may fall under the SSTB category of performing arts. A tip that self-employed singers get is disqualified due to tax credits.

But if they are lounge singers employed in casinos and restaurants, they may qualify for a tax credit, as they do not work for a particular trade in services or business, Gorczynski said.