As you might be aware, if you work in certain industries and receive tips, those tips might not be subject to taxes. The IRS released a preliminary document with several major categories:
- Beverage & Food Service
- Entertainment & Events
- Hospitality & Guest Services
- Home Services
- Personal Services
- Personal Appearance & Wellness
- Recreation & Instruction
- Transportation & Delivery
Note that the w2s will not reflect these tips in the 2025 w2, but it will be disclosed in a new box from 2026 – box 14b “Treasury tipped occupation code.” For 2025, the employer would have to provide this information.
Additionally, it is important to remember the difference between a) tip – voluntary from the customer and b) gratuity – non elective such as 18% gratuity for tables over 6 people. Only the tips are not subject to taxes if meeting the requirements.
Finally, you have remember that the maximum allowed is $25,000 and it is subject to phase out starting $150,000 single and $300,000 for married jointly
Should you have any questions about this topic, our team is here to help.
Journal of Accountancy Link – Treasury posts preliminary list of jobs eligible for no tax on tips
Treasury link – Occupations That Customarily and Regularly Received Tips on or Before December 31, 2024
