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The Treasury Department and the Internal Revenue Service recently proposed regulations identifying the occupations that customarily and regularly received tips before 2025 and that were eligible for a tax deduction.
“To this day, tens of millions of Americans depend on tips to feed their families, pay their rent, and make ends meet,” Secretary of the Treasury Scott Bessent said.
The proposed regulations also define “qualified tips” and other requirements taxpayers must comply with to claim the deduction.
The No Tax on Tips provision was enacted with the One Big Beautiful Bill Act. It allows employees and the self-employed to deduct up to $25,000 of qualified tips received in a year per return.
The deduction is available to eligible taxpayers who itemize their deductions and those who do not itemize and take the standard deduction. The deduction can be claimed on the 2025 tax return.
The deduction is available for taxpayers with incomes up to $150,000 annually or $300,000 if filing jointly.
“Through forward-thinking policies like No Tax on Tips, the president is boosting paychecks for America’s working families,” Bessent said. “This is critical to our goal of achieving parallel prosperity by building an economy where Main Street and Wall Street grow together. All workers deserve an equal chance to pursue the American Dream.”
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