The IRS and Treasury have released final regulations (“Regulations”) for the qualified tips deduction under section 224 of the Internal Revenue Code.
Here’s what changed from the proposed regulations:
- Digital assets excluded. The Regulations clarify that all digital assets (e.g., stablecoins, bitcoin, etc.) are excluded from the definition of cash tips.
- Qualifying occupations. The Regulations clarify that only occupations listed in the official List of Occupations that Receive Tips (the “List”), as published in the Regulations, qualify for the deduction. However, the preamble to the Regulations clarifies that while the list is exhaustive, the illustrative examples are not.
- Revised list. The List was revised by:
- Renaming existing categories. A handful of categories were expanded to be more inclusive; for example, renaming ‘Food Servers, Non-restaurant’ to ‘Food and Beverage Servers, Non-restaurant.’
- Expanding the illustrative examples. Most changes made were via additions and clarifications the occupation illustrations or references in the preamble.
- App/platform-based delivery person was added to the illustrative lists for both ‘Goods Delivery People’ and ‘Taxi and Rideshare Drivers and Chauffeurs.’ Additionally, the phrase “over established routes or within an established territory” was removed from the description of ‘Goods Delivery People.’
- Digital content creators also received clarification on when a payment is a tip or compensation (payment for access is compensation) and tips including superficial digital rewards tipped through audience engagement mechanisms.
- Other examples of formal additions include ‘doorman’ and ‘banquet staff,’ with apprentices/assistants and hiking/urban ghost tour guides informally included via the preamble.
- Adding new TTOCs. Three new occupations were added: Floral Designers, Visual Artists, and Gas Pump Attendants.
Notably, the Regulations do not address the Specified Service Trade or Business Exclusion safe harbor provided in Notice 2025-69, but reserved section 1.224-1 for guidance on this exclusion. Additionally, no changes were made to employer reporting requirements.
For additional information about the qualified tips deduction:
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