Tips, not TIPS
Humble Dollar frequently posts articles about TIPS - Treasury Inflation-Protected Securities. This post is not about inflation protected bonds.
The OBBBA includes new code 224, a deduction for tax years 2025-2028, for up to $25,000 in qualified tips received during the year for cash tips received by an individual in an occupation that customarily and regularly received tips before 2024. That code section also includes subsection 224(d)(2)(B) which provides that tips do not qualify for the deduction if they are received in the course of certain specified trades or businesses -- including the fields of health, performing arts, and athletics.
The Treasury Department posted on its website in early September 2025 a preliminary list of occupations that customarily and regularly received tips on or before December 31, 2024. Expect to see a final list posted to the federal register in the future.
Cornell Law School LLI has published the new law which you can read for other requirements and limitations.
Be advised that the deduction is for income taxes and will not reduce the payroll taxes on the qualified tips.
The OBBBA includes new code 224, a deduction for tax years 2025-2028, for up to $25,000 in qualified tips received during the year for cash tips received by an individual in an occupation that customarily and regularly received tips before 2024. That code section also includes subsection 224(d)(2)(B) which provides that tips do not qualify for the deduction if they are received in the course of certain specified trades or businesses -- including the fields of health, performing arts, and athletics.
The Treasury Department posted on its website in early September 2025 a preliminary list of occupations that customarily and regularly received tips on or before December 31, 2024. Expect to see a final list posted to the federal register in the future.
Cornell Law School LLI has published the new law which you can read for other requirements and limitations.
Be advised that the deduction is for income taxes and will not reduce the payroll taxes on the qualified tips.
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