On Friday, September 19, 2025 the Internal Revenue Service issued proposed regulations clarifying the “no tax on tips” provisions under President Trump’s One Big Beautiful Bill Act. Starting January 1, 2026, eligible tipped workers can deduct up to $25,000 each year in “qualified tips” from their federal taxable income through December 31, 2028. This will allow eligible tipped workers to take home more income each year. The deduction is retroactive to the beginning of the 2025 tax year, meaning it can be used by tipped workers to deduct qualified tips in the 2025 tax year. But the catch is that your payroll systems need updates NOW in order to properly track and report this new benefit for employees.
