In 2025, the IRS will implement a new tax break that allows certain workers to deduct up to $25,000 of tip income, potentially reducing their taxable income. USA Today reports that the tax break will apply to a wide variety of professions, not just the usual tipped roles like waitstaff or bartenders.
The full list of eligible jobs is broader than many might expect, with positions across various industries benefiting from this change. As the IRS refines the eligibility criteria, more workers could find themselves qualifying for this deduction. Here’s a closer look at some of the jobs that might surprise you.
Who’s Eligible for the Tax Break?
The new “no tax on tips” rule covers a variety of jobs that traditionally receive tips. Some roles on the preliminary list might raise your eyebrows, especially those you wouldn’t normally associate with tipping. Yes, plumbers, tow truck drivers, and yoga instructors now fall under this umbrella. The U.S. Treasury Department has released a list of 68 occupations that “customarily and regularly receive tips” as of December 31, 2024, which will determine eligibility for the tax break.
Interestingly, some service workers might never expect a tip, yet still qualify. For example, while plumbers typically don’t anticipate gratuity, they might receive a tip of $20 or more depending on the complexity of the job. According to a 2021 article on BobVila.com, a home advice site of former TV host Bob Vila, “it’s important to understand that plumbers don’t expect you to tip them” (BobVila.com, 2021). For more complex tasks like installing a new water line, tips could range between $100 and $200. Tow truck drivers also fall into this category, even if tipping is not mandatory or expected, as noted by Adrienne Woodland, a spokeswoman for AAA-The Auto Club Group.
Other eligible roles include taxi drivers, rideshare drivers, tattoo artists, math tutors, and golf caddies. Even podcasters and social media influencers could benefit from this tax break if they regularly receive tips. It’s clear that the government is acknowledging the expanding nature of tipping in today’s gig economy.
The Importance of Defining ‘Tip-Eligible’ Jobs
The U.S. government created this list in response to the growing tipping culture, which now spans far beyond traditional roles. In fact, the tipping landscape has expanded to cover so many positions that an official list was necessary to clarify who qualifies for the tax break.
Beyond the obvious roles like restaurant waitstaff and hairdressers, the new law will also affect jobs such as pastry chefs, fast food workers, baristas, and even dishwashers. The sheer number of workers now benefiting from this tax break is a reflection of how much tipping has permeated various sectors of service and beyond.
While the IRS continues to update the guidelines, the goal is to include anyone who regularly receives tips in any capacity. This means that even niche jobs—like those involving clown performances at fairs—are included, provided tips are customary.
As Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting, mentioned,
I would guess that this list is a first shot and is likely to be subject to modification as the IRS receives input following its release
(Wolters Kluwer, 2025). So, expect more adjustments to the list as the IRS gathers feedback.
What Doesn’t Qualify for the Break?
While the scope is broad, not all tips will be tax-free. Certain professions, such as those in healthcare, the performing arts, and athletics, are excluded from this new rule. For example, a doctor who receives a tip for a successful surgery wouldn’t be eligible for the deduction. Similarly, employees receiving mandatory service charges, such as a set tip included with a restaurant bill, won’t qualify. Tax experts suggest that voluntary tips, like those given to a street performer or a plumber, are more likely to qualify, while mandatory tips are likely excluded.
Also, note that this is a retroactive tax break, meaning tips earned in 2025 will be eligible, but only if they fit the criteria. As the IRS continues to refine the rules, more specifics will emerge. For those who qualify, the potential savings could be significant—especially when considering the $25,000 deduction cap.
Key Facts and Figures to Remember
- 68 occupations are listed by the U.S. Treasury Department as “customarily and regularly receiving tips” before December 31, 2024.
- Eligible workers can deduct up to $25,000 of tip income per year.
- A single taxpayer earning $50,000, including $5,000 in tips, could save approximately $600 through this tax deduction.
- The tax break phases out for single filers with a MAGI (Modified Adjusted Gross Income) over $150,000 and couples with a MAGI over $300,000.
- For those with incomes above $400,000 (single) or $550,000 (married filing jointly), the tax break completely phases out.
The IRS has yet to provide official guidance on the eligibility of mandatory tips. However, tax experts anticipate that automatic service fees—like those added to a restaurant bill—will not qualify for this deduction.
