In partnership with
Six weeks ago, I provided a summary of the One Big Beautiful Bill Act (OBBBA) provisions that temporarily reduce tax liability on income from tips. Even as the tax filing season has come to end for most, the windows for those who filed a six-month extension or others considering amendments to the return just filed remain open. On Monday, the Treasury Department published its final rule on exclusion of up to $25,000 per year in qualified tip income (regardless of filing status).
Yesterday, the White House took its economic policy promotion show on the road, with an event in the cradle of the hospitality industry, Las Vegas, Nevada. Despite nearly two months of rising costs for gasoline, airline tickets and groceries, the Trump Administration is going all in on its economic message, by touting success of its No Tax on Tips campaign to show its focus on getting money into working class pockets.
President Donald Trump (left center) greets Treasury Secretary Scott Bessent (right center) at a White House event in Las Vegas, Nevada, Friday, April 17, 2026. (YouTube via The White House)1
Since the filing deadline for 2025 just passed, the impact of this directive from the OBBBA won’t be known for quite while. The final rule does not take effect until June 12, so let’s get ahead of this and walk through the highlights to bring some Tax Clarity.
Before we go deeper into this, please take a moment and click on the links below and links within…for a word from one of our sponsors. |
Is ChatGPT About To Become Obsolete?
He revived EVs, revolutionized space, and built the biggest satellite network. But this AI tech could go down in history as the crown jewel of Elon's career. Watch this video to get the full story and how you should invest $1,000 right now. This New AI Breakthrough Is Shocking The Tech World, And Could Even Make ChatGPT Obsolete.
🍽️ Part I: Qualified Tips — The Deets, Clean and Quick
Keep one thing very clear in mind: this is all temporary. This exclusion from taxable income applies to employees and self-employed individuals for taxable years beginning after December 31, 2024, and before January 1, 2029 (that is, calendar year 2025 through 2028). Whatever happens after that will be left to a future Congress and President. But everyone has the option of going back and amending their tax return for the current or two prior tax periods.2
This image was generated by AI.
IRC §224(b)(2) limits the amount of the deduction based on a taxpayer’s modified adjusted gross income, and phases out the $25,000 maximum deduction for taxpayers
by $100 for each $1,000 by which the taxpayer's modified adjusted gross income exceeds $150,000 ($300,000 in the case of a joint return). The rule has three specific examples of how this phase out works3. So, keep your books and receipts in order.
One of the big outstanding issues at the proposed rule stage was the definition of “qualified tips4.” This means tip income “received as cash tips… by an individual in an occupation that ‘customarily and regularly received tips on or before December 31, 2024.’” The final rule defines a list of Treasury Tipped Occupation Codes (TTOCs) fall into eight categories:
100s – Beverage and Food Service
200s – Entertainment and Events
300s – Hospitality and Guest Services
400s – Home Services
500s – Personal Services
600s – Personal Appearance and Wellness
700s – Recreation and Instruction
800s – Transportation and Delivery
Here is the Treasury Department’s detailed list of the TTOCs for the 100s – Beverage and Food Service category, with columns left to right for occupation title, description, illustrative examples, and Related Standard Occupational Classification (SOC) system code(s):5
TTOC | Occupation Title | Occupation Description | Illustrative Examples | SOC code |
101 | Bartenders | Mix and serve drinks to patrons, directly or through waitstaff. | Barkeep, mixologist, taproom attendant, sommelier | 35-3011 |
102 | Wait Staff | Take orders and serve food and beverages to patrons at tables in dining establishment. | Cocktail waitress, dining car server | 35-3031 |
103 | Food Servers, Non-restaurant | Serve food to individuals outside of a restaurant environment, such as in hotel rooms, residential care facilities, or cars. | Room service food server, boat hop, beer cart server | 35-3041 |
104 | Dining Room and Cafeteria Attendants and Bartender Helpers | Facilitate food service; clean tables; remove dirty dishes; set tables; replenish supply of clean linens, silverware, glassware, and dishes; supply service bar with food; and serve items such as water, condiments, and coffee to patrons. | Bar back, bar helper, busser | 35-9011 |
105 | Chefs and Cooks | Direct and may participate in the preparation, seasoning, and cooking of salads, soups, fish, meats, vegetables, desserts, or other foods. | Executive chef, pastry chef, sous chef, private chef, restaurant cook, food truck cook, banquet cook | 35–1011, 35–2011, 35–2013, 35–2014, 35–2019. |
106 | Food Preparation Workers | Perform a variety of food preparation duties other than cooking, such as preparing cold foods and shellfish, slicing meat, and brewing coffee or tea. | Salad maker, sandwich maker, fruit and vegetable parer, kitchen steward | 35–1012, 35–2021, 35–9099. |
107 | Fast Food and Counter Workers | Serve customers at counter or from a steam table; take orders and serve food and beverages; may prepare food and beverages. | Barista, ice cream server, cafeteria server | 35-3023 |
108 | Dishwashers | Clean dishes, kitchen, food preparation equipment, or utensils. | Dish room worker, silverware cleaner | 35-9021 |
109 | Host Staff, Restaurant, Lounge, and Coffee Shop | Welcome patrons, seat them, and help ensure quality of facilities and service. | Maître d’hôtel, dining room host. | 35-9031 |
110 | Bakers | Mix and bake ingredients to produce breads, rolls, cookies, cakes, pies, pastries, or other baked goods. | Bread baker, cake baker, bagel baker, pastry finisher | 51-3011 |
Protect Client Trust in Volatile Markets
When markets get shaky, advisors don’t just manage portfolios. They manage a surge of client emails, questions, and last-minute meetings. BELAY’s free Financial Advisor’s Delegation Guide shows how better delegation protects responsiveness, reduces bottlenecks, and helps your firm stay client-facing when pressure and volume rise fast across the entire firm.
🔧 Part II: A Caution Regarding Cash Tips
There are a few exclusions from the definition of “cash tips.” Cash tips do not include: items paid in any medium other than cash, such as event tickets, meals, services, or other assets that are not exchangeable for a fixed amount in cash.6
In this brave new world of digital assets, here’s a big red light — anyone who receives a bright, shiny bitcoin or form of stablecoin as a tip for amazing service is in for a rude awakening. The regulation also specifically declares digital assets ineligible for the tax‑free OBBBA benefit. The regulatory environment for digital assets such as stablecoins is governed by the GENIUS Act and is still under development. This newsletter will go deeper into taxes on digital assets in the coming weeks.
There’s the scoop, everyone. Thanks for taking time to check out this week’s edition of the Tax Clarity Newsletter.
Thank you so much!
DISCLAIMER: The information in this newsletter is derived from public information, provided for education purposes. It is not provided as a financial advisory service and should not be relied upon as such. For advice on a specific tax matter, please consult a tax professional.
References (6):
1 The White House, “President Trump Delivers Remarks on Tax Week in Las Vegas, Nevada,” April 17, 2026.
2 “About Form 1040-X, Amended U.S. Individual Income Tax Return,” accessed April 17, 2026.
3 Internal Revenue Service, TD 10444, “Occupations That Customarily and Regularly Received Tips; Definition of Qualified Tips,” 91 Fed. Reg. 19048, April 13, 2026, last accessed April 17, 2026
4 IRC §224 - Qualified Tips, last accessed April 17, 2026.
5 Internal Revenue Service, “Occupations that customarily and regularly received tips on or before December 31, 2024,” last updated March 26, 2026, last accessed April 17, 2026.
6 TD 10044, “Occupations That Customarily and Regularly Received Tips; Definition of Qualified Tips,” 91 Fed. Reg. 19052, April 13, 2026, last accessed April 17, 2026.