What's Happening?
The Treasury Department has leaked a list of 68 occupations eligible for tax exemptions on tips, effective from 2025 to 2028. The list includes jobs in food service, entertainment, hospitality, and personal services, among others. This tax deduction allows employees and self-employed individuals to deduct qualified tips received in these occupations. The IRS is required to publish a finalized list by October 2, 2025. The deduction is capped at $25,000 annually and phases out for higher-income earners.
Why It's Important?
The tax exemption on tips could provide significant financial relief for workers in tip-based industries, potentially increasing disposable income and consumer spending. This policy may also encourage transparency in tip reporting and compliance with tax regulations. However, the phased-out deduction for higher earners could limit benefits for some workers. The policy reflects ongoing efforts to support low and middle-income workers, particularly in service industries heavily impacted by the pandemic.
What's Next?
The IRS will finalize and publish the list of eligible occupations by October 2025. Employers and workers in the affected industries should prepare for changes in tax reporting and compliance. The policy's impact on worker income and industry practices will be monitored closely.
