IRS Rule

This month, the Internal Revenue Service (IRS) announced a final rule for implementing the “no tax on tips” provisions of the One Big Beautiful Bill Act (OBBBA).  The IRS’s final rule, which is set to take effect on June 12, 2026, lists about 70 eligible job positions that qualify for federal income tax deductions on tips received. 

The following job positions are listed under the “Beverage & Food Service” and “Hospitality & Guest Services” sections of the IRS’s regulation:  

• Baggage porters and bellhops.
• Certain concierges.
• Certain hotel, motel, and resort desk clerks.
• Maids and housekeepers.
• Wait staff. 
• Bartenders.

Eligibility

An employee is eligible to take the tax deduction when filing his or her federal income taxes if the employee actually works at a job that “customarily and regularly receives tips,” regardless of the job title.

For example, even though the IRS regulations list certain “hotel, motel, and resort desk clerks” as potentially eligible for the “no tax on tips” deduction, the employee must regularly and customarily receive at least $30 per month in tips, and only the tips portion of the employee’s compensation is eligible for the deduction.

What’s a Qualified Tip?

The IRS has provided strict clarification of what constitutes a “qualified tip.” Under the final regulations, a qualified tip must be given voluntarily by a customer, and the customer must have the unrestricted right to determine the exact amount of the tip.  The payment cannot be subject to negotiation or dictated by employer policy.  

That means mandatory service charges or automatic gratuities added to a bill do not qualify as tips under this specific provision; they are classified as regular wage income. 

Additionally, federal income tax deductions on tips are income tax deductions for individual federal income tax filers only; they are tax deductions for the employer.