Review and act NOW!
In late September, the Treasury Department presented a list of preliminarily-approved occupations that will qualify for the new federal tax-free tip income provision on 2025 tax returns.
Here is what you need to know.
Background
As part of the One Big Beautiful Bill Act (OBBBA), qualifying tip income will not be subject to federal income tax from 2025 through 2028. The benefit is limited to $25,000. There is an income limit of $150,000 for single filers and $300,000 for joint filers. (This income limit is modified adjusted gross income, including the tips.) The deduction amount is reduced (but not lower than zero) by $100 for each $1,000 in excess of these amounts. (See the Weekly Tax Tip published July 17, 2025 for more details.)
Current Situation
While some occupations were listed in the tax bill, the Treasury Department was tasked with coming up with specific regulations to determine what, exactly, qualifies as an acceptable tip occupation. There is now a full list of qualifying activity that has been sent out for comment prior to finalizing the rule. That news alert can be found here.
Action
Review the list. Review the list to ensure your activity is included. Here is the list.
Leave a comment. If your occupation is not listed, now is the time to comment on the preliminary list by advocating to include your occupation. If others like yourself want the occupation added, it may just get done before the tax rule is finalized.
ALL COMMENTS must be received by October 22, 2025.
Keep track now! Remember the tax year is 3/4 complete. So now is the time to ensure your employer is capturing your tax-free tip income and is preparing to present supporting documents.
Observations
Treasury Tipped Occupation Code (TTOC). This is a new code that defines accepted occupations for tax-free tips. Since the occupation must customarily receive tips before 12/31/24, you may find the definition much narrower than found in Standard Occupational Classifications. So review the definition.
The general areas of occupations are:
Beverage & Food Service (100s)
Entertainment & Events (200s)
Hospitality & Guest Services (300s)
Home Services (400s)
Personal Services (500s)
Personal Appearance & Wellness (600s)
Recreation & Instruction (700s)
Transportation & Delivery (800s)
Know your code. You will need to provide an occupation code when claiming this tax-free income. So having an approved occupation and an employer that knows the codes will make filing your taxes easier to do.
Once the comment period is over, the Treasury and IRS will publish the final codes for use in preparing your 2025 tax return.
James Angell is a Willits based Certified Public Accountant. His office is located at 461 S. Main St. and he can be reached at 459-4205.
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