Bartenders are on the list of traditionally tipped occupations.
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Earlier this week, the Treasury released its preliminary list of jobs that qualify for the new “no tax on tips” deduction.
Here’s why the list matters. Under the One Big Beautiful Bill Act (OBBBA), tip income is temporarily deductible—only for tax years 2025 through 2028—for individuals in jobs “which customarily and regularly received tips on or before December 31, 2024, as provided by the Secretary.”
A whopping 68 occupations made the list. Some occupations, like food servers and casino dealers, were completely expected, while others, like roofers and HVAC installers, were not.
The list has sparked some interesting conversations. Lawyers, of course, didn’t make the list, and neither did journalists—more on that in a minute.
As I scanned the list, I had to admit that I couldn’t think of any job that I’ve worked in where I was tipped. Most of my part-time work experience was paid as pure wages—for example, working at GapKids or answering phones at the Chamber of Commerce—and it wasn’t customary to tip in those jobs. But even when I worked jobs that made the list—like babysitter, podcaster, or desk clerk (back in the days when I was a temp to earn money while in law school)—I didn’t get tips.
I think a lot of it has to do with how we view tipping today versus a few years ago. The tipping culture has been on the rise post-pandemic, even inspiring this 2023 article about the rise of tipping—and tipflation—thanks to point-of-sale terminals.
But back to the list. While some of the jobs on the list are unexpected, others are downright confusing, especially for self-employed individuals in a Specified Service Trade or Business (SSTB). Those occupations, sometimes referred to as section 199A businesses, are not eligible for the deduction—the same is true for employees whose employer is in an SSTB. That includes businesses that provide professional services, such as doctors, lawyers, consultants, athletes, and brokers—typically, any business whose success depends on the reputation or skill of its employees. But oddly enough, some of those occupations still showed up on the list. So, what does that mean? How will we sort it out? Treasury anticipates issuing additional guidance on what exactly will fall under this carve-out.
And of course, I’m sure there are those already contemplating all of the ways that we can combine professional services with a side of entertainment—like clown lawyers and magician doctors—to try to eke in under the rules and out of the exceptions. Since Congress clearly expects workers and employers to be (cough) creative, Treasury is authorized to issue additional guidance to prevent abuse.
The official occupation list will be published in the Federal Register as part of proposed regulations from the Treasury and IRS. The government will also seek and consider those comments before publishing any final rule, so we expect some changes.
As a reminder, there will be no changes to Form W-2 for the tax year 2025, even though some provisions–like the tips deduction–apply to this tax year. The IRS has previously said that the omissions are “intended to avoid disruptions during the tax filing season and to give the IRS, business and tax professionals enough time to implement the changes effectively.”
There will be changes to Form W-2 for the tax year 2026. You can get a first look here.
Additional changes are on the way from the Treasury. This week, the Tax and Trade Bureau announced that it will stop issuing paper checks for disbursements, including tax refunds, to comply with a Trump executive order. Other federal agencies, including IRS and Social Security, are moving in that direction.
Speaking of moving in the right direction, transit riders—and football fans—impacted by a dispute over funding for public transportation in Pennsylvania got a surprise reprieve this week. FanDuel, a popular online gambling company, threw them a Hail Mary by offering to restore express train service for the Philadelphia Eagles’ season opener against National Football League (NFL) division rivals, the Dallas Cowboys, on Thursday.
The game itself wasn’t without controversy–from an early ejection related to a spitting incident (don’t get me started) to an hour-long weather delay. I was admittedly torn during the game. Of course, I wanted the Eagles to win (they did, besting the Cowboys 24-20) but I wanted them to do it on offense. Why? My older brother, who was also my fantasy football head-to-head competition for the week, was gambling on the Philly defense coming up big to beat me.
If you’ve ever played fantasy football–millions of Americans do, including former IRS Commissioner Danny Werfel–you completely understand my dilemma. While my league only plays for bragging rights, many leagues involve money, with the winners taking home cash prizes. What you may not know? These prizes are considered taxable income and subject to federal and state taxes. Winnings are taxable and losses may be deductible, although under the One Big Beautiful Bill Act (OBBBA), beginning in 2026, you can deduct only up to 90% of the amount of your losses during the taxable year. Who knew that football could be so complicated?
There’s more football this weekend, although some taxpayers and tax professionals may also be scrambling to finish their returns–partnerships and s-corporations on extension have until September 15 to file.
Enjoy your weekend,
Kelly Phillips Erb (Senior Writer, Tax)
This is a published version of the Tax Breaks newsletter, you can sign-up to get Tax Breaks in your inbox here.
Questions
What tax benefits are related to cars?
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This week, a reader asks:
I read your article about “no taxes on car loan interest.” If I don’t qualify and I bought a car, is there any other way I can claim it on my taxes?
You’re referring to a temporary provision under the One Big Beautiful Bill Act that allows auto loan interest to be deductible (but only for cars assembled in the U.S.) during tax years 2025 through 2028. The deduction is capped at $10,000 and phased out for individuals earning above $100,000 (for single filers) or $200,000 (for married taxpayers filing jointly). And it’s for autos only—campers and RVs are excluded.
You can read more about the deduction—as well as the new deductions for tips, overtime and seniors—here.
Now, to tackle your bigger question: Can you claim a tax break for the cost of a new car on your federal income tax return?If it’s for personal use only, the answer is generally no—with a few exceptions.
If you itemize your deductions on your federal tax return, you might be able to deduct the sales tax you paid when buying the car. However, this is a numbers game—you can either deduct state income tax or state sales tax, but not both.
The sales tax deduction is part of the state and local taxes (SALT) deduction. In addition to your income or sales tax, you can also claim your property taxes as part of the SALT deduction.
Under OBBBA, the SALT deduction is worth up to $40,000. The $40,000 cap—which is an increase from last year’s $10,000 cap—goes into effect for the 2025 tax year. There’s a 1% increase in the cap each year, but only until 2029 (it goes back to $10,000 in 2030). A phase-down applies for taxpayers with modified adjusted gross income (MAGI) over $500,000—unlike a phaseout, which eliminates the deduction, a phase-down simply reduces it.
If you bought a qualified electric vehicle (EV) or plug-in hybrid, you could be eligible for a tax credit. However, OBBBA changed those rules, too—a credit will not be allowed with respect to any vehicle acquired after September 30, 2025. A vehicle is “acquired” as of the date a written binding contract is entered into and a payment has been made. A payment includes a nominal down payment or a vehicle trade-in. (You can find out more about expiring energy tax breaks here.)
If you drive your car to medical appointments or to perform charitable services—and you itemize your deductions—you may be able to deduct your mileage. For the tax year 2025, the standard mileage rate is 21 cents per mile driven for medical purposes and 14 cents per mile driven in service of charitable organizations (fixed by Congress).
If you use your car to move—and you’re an Armed Forces member on active duty moving under orders to a permanent change of station—you may be able to deduct your mileage (otherwise, moving expenses are not deductible). For the tax year 2025, the standard mileage rate is 21 cents per mile driven for moving expenses.
All that said, if you bought a car for business reasons, you have more opportunities to claim a tax break. The IRS lets you deduct either the standard mileage rate (for the tax year 2025, the standard rate is 70 cents per mile) or your actual expenses. The rules can be tricky to navigate depending on your business use—if you think you might qualify for a tax deduction related to your business, I suggest checking with your tax professional.
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Do you have a tax question that you think we should cover in the next newsletter? We’d love to help if we can. Check out our guidelines and submit a question here.
Getting To Know You: Jason Wiggam
Most taxpayers hope to interact with tax authorities as little as possible—a call to ask a quick question, a click on the IRS website, or a scrawled note on a tax bill popped in the mail. That’s why, when the tax authorities come calling, taxpayers often seek out professional help.
That’s exactly the sort of work that Jason Wiggam, a founding partner of Wiggam Law in Atlanta, Georgia, does. Jason focuses his practice on tax resolution—assisting taxpayers to resolve their tax matters. He explains, “most clients come to me because they want their issue resolved, so I find that ‘tax resolution attorney’ better reflects what I do and what clients care about.” Resolution work involves collections (helping individuals and businesses that owe the IRS or state but can’t pay in full) and controversy (audits, appeals and litigation).
Jason also acts as his firm’s “visionary,” focusing primarily on business development, marketing and sales. He founded his firm almost ten years ago with just an assistant–it now has a team of forty, including sixteen attorneys, four enrolled agents and seven paralegals.
Jason is the next professional to be featured in our Getting To Know You Tuesday series—a chance to get to know all kinds of tax professionals and understand that the field of tax is bigger than April 15. If you’d like to nominate a tax professional to be featured, send your suggestion to kerb@forbes.com with the subject: Getting To Know You Tuesday.
Statistics, Charts, and Graphs
Last year, I noted that employers were thinking about long-term strategies for attracting and retaining workers without dipping into their cash flow, making equity compensation awards all the rage again. That trend appears to be continuing–including awards of stock options.
When you receive a grant of stock options, it is imperative that you understand which type of options you have: the more common nonqualified stock options (NQSOs) or incentive stock options (ISOs). The difference matters, especially with ISOs since they qualify for special tax treatment.
The ISO tax outcome depends on meeting certain requirements and post-exercise holding periods. What matters for ISO taxes is how long you hold the shares that you acquire after exercise. The best tax treatment occurs when you meet the two holding periods for the stock: at least (1) two years from the date of grant and (2) one year from the date of exercise.
If you satisfy both holding periods, all appreciation over the exercise price is long-term capital gain when you sell the shares, with no part of the proceeds taxed at the higher rates that apply to ordinary income.
Here’s an example. Let’s say that your ISO exercise price is $10 and the stock price at grant. You exercise the options when the market price is $15 and sell when the stock hits $17.
Example of tax consequences from ISOs.
Bruce Brumberg, JD
If you sell, transfer, gift, exchange, or short the stock too soon, without meeting both of the ISO holding periods, you lose the tax benefits of ISOs that occur with a qualifying disposition. That is termed a “disqualifying disposition.”
But if you get it right? You get a tax break in the form of long-term capital gain.
Of course, it’s possible to hold the shares too long. What if, for example, the market takes a dip? The goal is to hit the sweet spot–and that requires some tax planning.
A Deeper Dive
PARIS, FRANCE – MAY 12: Taylor Swift performs onstage during night four of “Taylor Swift | The Eras Tour” at La Defense on May 12, 2024 in Paris, France. (Photo by Kevin Mazur/TAS24/Getty Images for TAS Rights Management )
Getty Images for TAS Rights Management
If you’re a regular reader, you know that members of my family consider themselves Swifties (I’ll be torched if I don’t point out that one, however, is staunchly outside of the Swiftie camp). So a look at a Taylor Swift tax story? It totally deserves a deeper dive.
Swift has been in the news lately–her recent engagement to Kansas City Chiefs tight end Travis Kelce and the announcement of her new album, “The Life of a Showgirl,” have kept her in the spotlight. But Swift is making headlines for another reason–Rhode Island has now implemented the Non-Owner Property Tax Act, which some taxpayers are calling the “Taylor Swift Tax.” The tax is a surtax on individual property for the wealthy on their second homes.
There’s no doubt that Swift is wealthy. Forbes labeled her a billionaire in 2023 and estimates her worth today to be around $1.6 billion (and that’s before the new album drops). Her property in the Island State, High Watch, is Rhode Island’s most expensive home.
The new tax, which will go into effect in 2026, assesses significantly higher property taxes on expensive homes in the state if that is not the homeowner’s primary residence. Before the increase, Swift would have paid $201,000 in annual property taxes on this home. Rhode Island will now collect $337,442 in property taxes on the same piece of property, representing an increase of over 67%. If Swift were to spend more than half the year in the home, or if the home were to be valued under $1 million, she would not have to pay this additional six-figure layer of tax.
Rhode Island intends to use the proceeds from the tax to support housing initiatives such as the Low-Income Housing Tax Credit. The bill has a secondary goal of rewarding owners who live in the homes that they own, rather than leave them vacant for significant parts of the year. The logic is that if these homes that are rarely used can be rented, then the supply of rentals will increase, leading to a natural decline in the cost of rentals. While some may applaud the decision, there are three key consequences that the state might face as a result of this decision, including chasing property owners to other states.
(Higher taxes don’t always result in millionaire flight–a statistic that New York City mayoral candidate Zohran Mamdani is banking on.)
Tax Filings And Deadlines
📅 September 15, 2025. Third quarter estimated payments due for individual taxpayers.
📅 September 30, 2025. Due date for individuals and businesses impacted by recent terrorist attacks in Israel.
📅 October 15, 2025. Due date for individuals and businesses affected by wildfires and straight-line winds in southern California that began on January 7, 2025.
📅 November 3, 2025. Due date for individuals and businesses affected by storms in Arkansas and Tennessee that began on April 2, 2025.
Tax Conferences And Events
📅 September 9-September 16 (various dates), 2025. IRS Nationwide Tax Forum in New Orleans, Orlando, Baltimore and San Diego. Registration required (discounts available for some partner groups).
📅 September 17-18, 2025. National Association of Tax Professionals Las Vegas Tax Forum. Paris Hotel, Las Vegas, Nevada. Registration required.
📅 Sept. 26-27, 2025. National Association of Tax Professionals Philadelphia Tax Forum. Sheraton Philadelphia Downtown, Philadelphia, Pennsylvania. Registration required.
Trivia
When were tips first considered taxable income in the U.S. for federal purposes?
(A) 1919
(B) 1948
(C) 1960
(D) 1982
Find the answer at the bottom of this newsletter.
Positions And Guidance
As hurricane season peaks and wildfire risks remain high, the IRS urges individuals and businesses to create or update their emergency preparedness plans as part of National Preparedness Month. Keeping updated records can speed up recovery and make it easier to apply for disaster assistance and emergency relief if a disaster strikes.
Stay Exempt, the IRS’s online resource for tax-exempt organizations, is now available at IRS.gov/Stay-Exempt. This content is no longer available at StayExempt.IRS.gov, where it was previously. Stay Exempt is an educational resource developed by the IRS to help current and prospective tax-exempt organizations understand and maintain their tax-exempt status.
Noteworthy
Social Security Administration (SSA) Commissioner Frank J. Bisignano announced several executive leadership team and organizational changes at the agency. Among other things, functions previously under Operations will be realigned into three distinct areas: Field Operations, Processing Center, and Digital Service. SSA is also consolidating all Security functions into a single, integrated organization.
The U.S. Senate Finance Committee will hold a nomination hearing on Wednesday, September 10, 2025, at 10:00 AM ET to consider Jonathan Greenstein to be a Deputy Under Secretary of the Treasury, and Donald Korb to be Chief Counsel for the Internal Revenue Service (IRS) and an Assistant General Counsel in the Department of the Treasury. You can find more information on Korb here.
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If you have tax and accounting career or industry news, submit it for consideration here or email me directly.
In Case You Missed It
Here’s what readers clicked through most often in the newsletter last week:
You can find the entire newsletter here.
Trivia Answer
The answer is (A) 1919.
The IRS issued a regulation in 1919 making clear that tips were “compensation for personal services” and considered taxable income. That reg, section 1.61-2, still exists today, but has been modified over the years.
Taxi cab tips are taxable income.
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In 1948, a taxi driver named Harry A. Roberts went to Tax Court to argue whether tips were considered gifts or income. The Tax Court found that tips were income (confirmed on appeal to the Ninth Circuit).
The Supreme Court confirmed those findings in its 1960 Duberstein opinion (a case near and dear to the hearts of tax attorneys). A footnote referenced the Ninth Circuit Roberts’ opinion, noting that tips were “classic examples” of taxable “payment… in return for services rendered.”
The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) established the “8% rule” for large food and beverage companies. Under the rule, if employees did not report tips amounting to at least 8% of the company’s gross receipts, the employer had to report the shortfall on Forms W-2. The rule, supported by then-Senator Bob Dole (R-Kansas), was an effort to boost compliance. At the time, estimates suggested that about 85% of tip income went unreported by workers in food and beverage, beauty and barber services, gambling, and taxicab businesses. (The Joint Committee on Taxation reported that the only income with a lower compliance rate was illegal income, reported at just 5%.)
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