WASHINGTON (AP) —The U.S. Treasure is proposing regulations for President Trump's ' no tax on tips.' The regulations proposed by the U.S. Treasury on Friday detail the occupations covered, who will qualify and what counts as a qualified tip:
1. The tip must be voluntarily given, so mandatory tips or auto-gratuities would not qualify for the “no tax on tips” benefit.
2. Tip pools and similar arrangements qualify, so long as they are reported to the IRS and voluntary.
3. The benefit is not available to married individuals who file their taxes separately.
4. The tip must be given in cash, check, debit card, gift card or any item exchangeable for a fixed amount of cash, unlike digital assets.
5. Any amount received for illegal activity, prostitution services, or pornographic activity does not qualify as a tip
A provision in the Republicans’ massive tax and spending law allows certain workers to deduct up to $25,000 in “qualified tips” from their federal income taxes each year from 2025 through 2028. The deduction phases out for taxpayers with a modified adjusted gross income over $150,000.