Workers in a wide range of industries—from bellhops to influencers—will be eligible for a new tax break on tips the IRS outlined Friday.
The proposed rules (RIN: 1545-BR63) further define a qualified tip to include tips paid in cash or equivalent medium and given by a customer or through tip pool. Tips must be voluntary and any from automatic gratuity won’t be eligible, the rules said.
Tips received for prostitution services or pornographic activity won’t qualify for the break— narrowing earlier draft guidance that didn’t include this restriction.
Golf caddies, makeup artists, and babysitters are among those who qualify for the break.
Those earning tipped income can deduct up to $25,000 per year under a massive Republican tax-and-spending cut package enacted in July. The tax break is retroactive for tax year 2025 and is effective only through 2028.
The law tasks the IRS and Treasury Department with deciding which jobs qualify. Nearly 70 jobs will be eligible for the break.
The rules will go through a notice-and-comment period before being finalized. The IRS will have hearing on the regulations Oct. 23.
(Updated with additional reporting throughout. )
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