In a landmark policy shift, the Trump administration has released a comprehensive list of occupations that will be eligible for tax-free tips, as per the latest Republican tax legislation. This development, which covers a broad spectrum of American workers, is considered one of the most significant changes to tip taxation in decades.
The Treasury Department published the preliminary list on Tuesday, showcasing a diverse range of jobs from traditional roles like golf caddies and blackjack dealers to contemporary positions such as podcasters and social media influencers who receive gratuities through digital platforms. This list is a direct result of the legislation that President Donald Trump signed in July, which introduces a temporary provision exempting federal income taxes on tips for qualifying workers through 2028, thus fulfilling a key campaign promise aimed at supporting service industry employees.
The tax relief is applicable to workers earning less than $160,000 annually by 2025, with an estimated benefit to approximately 4 million Americans in tipped occupations across the nation's economy. Tipped workers account for roughly 2.5 percent of all jobs in the United States as of 2023, according to Yale Budget Lab estimates, highlighting the broad impact of this new tax policy.
The administration met its 90-day deadline to publish qualifying occupations following the bill’s signing, and the complete list is now accessible on the Treasury Department website for public scrutiny. The list is categorized into eight distinct sections, encompassing eligible positions in beverage and food service, entertainment and events, hospitality and guest services, home services, personal services, personal appearance and wellness, recreation and instruction, and transportation and delivery.
Traditional service industry workers such as sommeliers, cocktail waiters, pastry chefs, and cake bakers are included in the tax exemption along with entertainment professionals like bingo workers, club dancers, and disc jockeys. The list also extends to include modern digital economy workers, with streamers and online video creators joining the comprehensive list of eligible occupations as the gig economy continues to expand.
The legislation is not without its critics, however. NBC reported that Budget Lab analysis reveals limited overall economic impact due to the lower income levels typical among tipped workers, with more than 37 percent facing no federal income tax obligations in 2022 before this legislation. Furthermore, congressional budget analysts project the provision will increase the federal deficit by $40 billion through 2028, while the nonpartisan Joint Committee on Taxation estimates $32 billion in costs over ten years.
Workers must report tips to employers and include them on W-2 forms to qualify for the tax exemption, ensuring proper documentation and preventing tax avoidance schemes. Despite the federal exemption under the new legislation, payroll taxes for Social Security and Medicare programs remain in effect on tip income, maintaining funding for these essential social insurance programs. State and local taxes also continue to apply to tip income, meaning workers in high-tax states may still face significant tax obligations.
Recent polling from The Associated Press-NORC Center for Public Affairs Research shows mixed public reception, with half of American adults expecting the tax law to primarily benefit wealthy individuals rather than working-class Americans. Approximately 60 percent of poll respondents believe the legislation will harm rather than help low-income Americans, according to the comprehensive survey results released alongside the Treasury Department announcement.
