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President Donald Trump\u2019s \u201cno tax on tips\u201d deduction<\/a> offers financial planning opportunities for some workers. But it\u2019s too soon to execute those strategies, experts say.<\/p>\n Enacted via Trump\u2019s \u201cbig beautiful bill,\u201d<\/a> the \u201cno tax on tips\u201d provision allows certain workers to deduct up to $25,000 in \u201cqualified tips\u201d per year from 2025 through 2028.\u00a0\u00a0<\/p>\n The U.S. Department of the Treasury in August released an early list of 68 occupations<\/a> that \u201ccustomarily and regularly received tips\u201d as of year-end 2024. But some of those jobs ultimately may not qualify<\/a>.\u00a0\u00a0<\/p>\n If your occupation appears in the preliminary list, \u201cmy big recommendation right now is to not make any major moves,\u201d said Thomas Gorczynski, a Tempe, Arizona-based enrolled agent, which is a tax license to practice before the IRS.<\/p>\n More from Personal Finance:<\/strong> Experts expect further details from the Treasury and IRS should come by early October, but the exact timing remains unclear.<\/p>\n \u201cWe still need a lot more guidance,\u201d said Melanie Lauridsen, vice president of tax policy and advocacy with the American Institute of Certified Public Accountants.\u00a0<\/p>\n Otherwise, tax professionals may not have enough information on hand to help their clients make year-end tax planning decisions.<\/p>\n \u201cIt\u2019s when you make the assumptions where it gets a little dangerous,\u201d she said.<\/p>\n<\/div>\n It\u2019s unclear which jobs from the Treasury\u2019s preliminary list will qualify, experts say.<\/p>\n Some of the occupations from the preliminary list may be eligible for the deduction, others might not.<\/p>\n Your job can\u2019t be a so-called \u201cspecified service trade or business<\/a>,\u201d or SSTB, experts say. Trump\u2019s 2017 legislation outlined the list of SSTBs to limit eligibility for a 20% deduction for certain businesses.<\/a>\u00a0The SSTB list includes jobs in health care, legal and financial services, performing arts, sports and more.<\/p>\n What\u2019s more, eligibility may also depend on whether you\u2019re a W-2 worker or are self-employed, according to Gorczynski.<\/p>\n Experts say that further clarification is needed to understand which occupations qualify and how the official list will interact with the SSTBs.<\/p>\n<\/div>\n With key questions about the \u201cno tax on tips\u201d deduction unclear, some workers are at a standstill with year-end planning decisions, experts say.<\/p>\n One planning opportunity could be reducing modified adjusted gross income, or MAGI, to qualify for the deduction, experts say. The tax break on tips phases out, or gets smaller, once MAGI exceeds $150,000.<\/p>\n Another example could include retirement savings. Many self-employed workers make retirement plan contributions, but it\u2019s uncertain whether this move will reduce net business income and limit the tips deduction, Gorczynski said.\u00a0\u00a0\u00a0<\/p>\n \u201cThis deduction is going to be a key metric when we\u2019re doing planning for sole proprietor clients,\u201d but experts need further guidance to maximize the overall tax break, he said.<\/p>\n Also, for workers who are in jobs that appear in the preliminary list but don\u2019t interact with the SSTB list, it\u2019s important to \u201cget a grasp of what the law says and what it means,\u201d said Lauridsen.<\/p>\n Sooner rather than later, it may be worth reaching out and consulting with a tax professional or a financial advisor, experts say.<\/p>\n<\/div>\n
Who can claim the \u2018no tax on tips\u2019 deduction? It\u2019s complicated, experts say<\/a>
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Tax planning opportunities<\/h2>\n