New Treasury Guidance on "No Tax on Tips" - What You Need to Know
- HFM CPAs + Business Advisors
- Oct 2, 2025
- 2 min read
The Treasury Department has released crucial guidance on one of the most talked-about provisions in recent tax legislation - the "no tax on tips" deduction from the One Big Beautiful Bill Act. This development represents a significant opportunity for workers in tip-based industries, but like most tax changes, the details matter enormously.
What Makes This Guidance So Important?
This isn't just another minor tax adjustment. The new provision allows eligible workers to deduct up to $25,000 of qualified tips annually - a substantial benefit that could meaningfully impact tax liability for millions of Americans. The deduction is available whether you itemize or take the standard deduction, and it phases out only for higher-income taxpayers ($150,000+ for single filers, $300,000+ for married filing jointly).
Key Areas for the "No Tax on Tips" Guidance
The Treasury's proposed regulations address critical questions that have been circulating since the legislation passed:
Which jobs qualify - Eight categories spanning food service, entertainment, hospitality, personal services, and even digital content creation
What counts as eligible tips - Voluntary payments in cash or equivalent forms (yes, credit card tips count), but not mandatory service charges
Important exclusions - Tips received in certain professional service businesses don't qualify
Reporting requirements - Tips must be properly reported on Forms W-2, 1099, or 4137
Why This Matters Now
The complexity of these new rules creates both opportunities and potential pitfalls. Many workers and employers are still unclear about implementation, and the guidance addresses practical questions about tip-sharing arrangements, digital platforms, and reporting obligations. With 2025 tax returns on the horizon, understanding these rules is essential for maximizing benefits while ensuring compliance.
Getting a Clearer Picture
While this summary highlights the key points, Accounting Today, a trusted authority in tax and accounting news, published an article that provides detailed examples, specific occupation codes, and nuanced explanations that will be crucial for proper implementation.
The stakes are significant - this deduction could provide substantial tax savings for eligible workers, but only if the rules are properly understood and followed.
Questions?
Contact HFM CPAs for a complimentary consultation to discuss how these new tax provisions might affect your specific situation. Our team stays current with evolving tax legislation to help you navigate new opportunities and requirements.
HFM CPAs provides specialized accounting, tax, and assurance services to individuals and businesses across Connecticut and Rhode Island.
