Here’s what tips and workers qualify for ‘No Tax on Tips’ law in 2026

By Mark Robison, Reno Gazette Journal 

Tax returns filed in 2026 will be the first with President Donald Trump’s “No Tax on Tips” policy in effect — and it may be confusing for some filers because not all tipped occupations qualify and neither do all tips.

“There are some folks, especially in Nevada, who might think they qualify, but they don’t,” Francine Lipman said.

She’s a tax attorney, former Nevada tax commissioner and current University of Nevada, Las Vegas law professor.

Also, “it’s very complicated,” Lipman added.

Nevada is ground zero for this change because, as a tourist and gaming destination, it has more than twice the rate of tipped workers as other states.

The temporary “No Tax on Tips” policy lasts through the 2028 tax year unless renewed by Congress.

What Nevada jobs do NOT qualify for ‘No Tax on Tips’?

Nevada has legal recreational marijuana, but it’s still illegal at the federal level.

That means budtenders and retail staff at cannabis shops do not qualify for “No Tax on Tips.”

Nevada is also the only state in the nation with legal brothels, but its main workers do not qualify for the new tax policy.

“Amounts received for prostitution services and pornographic activity are not qualified tips,” IRS language explains.

Lipman said, “If the federal government has basically said this is illegal, then you don’t get that benefit.”

What jobs qualify for ‘No Tax on Tips’?

How about strippers, aka exotic dancers, who also have a significant presence in Nevada’s “Sin City” and elsewhere?

They appear to qualify. The IRS lists a category for “dancers” among its approved tipped workers.

Among the workers listed as qualifying are:

• Beverage and food service: Bartenders, wait staff, food servers, cooks
• Entertainment and events: Gambling dealers, change persons, dancers, musicians, digital content creators
• Hospitality and guest services: Baggage porters, hotel desk clerks, maids
• Home services: Landscape workers, electricians, plumbers, cleaners, locksmiths
• Personal services: Pet caretakers, tutors, babysitters
• Personal appearance and wellness: Massage therapists, barbers, hairstylists, manicurists, tattoo artists, tailors
• Recreation and instruction: Golf caddies, travel guides, sports instructors, “self-enrichment teachers”
• Transportation and delivery: Parking attendants, drivers, delivery drivers, car wash attendants, home movers

Which tips qualify — and which tips don’t — for “No Tax on Tips”?

“This is only for certain tipped workers where they are voluntarily paid by customers without mandatory service charges or without compulsion,” Travis Thompson said.

Thompson is a director at Fennemore Law in the firm’s business and finance practice, focusing on tax litigation.

That means if you’re part of the wait staff serving a large party that has, say, a mandatory 18% gratuity, such a tip does not qualify and will face federal income taxes.

The “no tax” policy tops out at $25,000. Tips received after reaching that amount do not qualify.

If a taxpayer’s income is over $150,000, then the benefit starts to phase out.

Some taxes still apply to tips

If a worker’s tips are reported, they’re still subject to other taxes.

“Under current law,” Lipman said, “this deduction is only for federal income tax purposes.”

Payroll taxes for Medicare and Social Security are still required to be paid for declared tips. In places with state and local income taxes — something Nevada doesn’t have — tips could still be taxed.

Requirement for married couples who have tipped income

If you’re married, you must file jointly in order to get the deduction for tipped income.

Lipman said this can become an issue for some married couples.

“If your spouse has tax issues, some people file separately,” she said. “You may have higher education debt and you’re trying to qualify for a reduced loan repayment, they take your (income) off your tax return. If you file jointly, they include both incomes.”

How does ‘No Tax on Tips’ work?

The “No Tax on Tips” policy does not require a person to itemize their taxes.

“Essentially what the law did — and what people should know — is it created what’s called an above-the-line deduction for tipped workers,” Thompson said.

“What that did was allow tipped workers to take this deduction for whatever tips they receive up to $25,000 and they can reduce what’s called adjusted gross income. This makes it a very valuable credit or deduction because now they are taxed on a lower income amount.”

He gave the example of a worker making $100,000 in one year with $50,000 of that in tips.

“I could take $25,000 of that as a deduction so I would be taxed at $75,000 and not $100,000 for the adjusted gross income that year,” Thompson said.

He noted that in some industries, tips make up the majority of a person’s income so they can easily hit the $25,000 maximum.

For higher income tipped workers, the benefit begins to phase out for each $1,000 in income over $150,000 in a year.

The calculation gets complicated, but as one example, if a tipped worker made $200,000 in a year, they would not get to take the full $25,000 deduction for tipped income. They’d only get to take a $20,000 deduction.

Why declare tips if you haven’t in the past?

Workers are supposed to declare all of their tips.

“They should obviously be claiming the full amount as ordinary income,” Thompson said, “but it is industry standard not to do that.”

Major casinos have agreements with the IRS to report tips for workers, but smaller businesses generally don’t.

Because other federal taxes will be taken out if reported, the incentives are not great for doing so — but there are some.

“The valet or the pizza delivery person who gets these tips may want to include all their tips in income for a myriad of reasons, including Social Security benefits and Medicare down the road, and maybe even qualifying for a car loan or to show you have more income for a house loan,” Thompson said.

Seek professional tax help if feeling anxiety over ‘No Tax on Tips’

Employers will be expected to track and report tips in 2026 for tax returns filed next year.

That won’t help workers filing this year, who generally will need to have tracked and documented their tips if they want the deduction.

“It’s beyond the scope of most people,” Lipman said.

This is where a tax app or a professional tax preparer could help — in part because the Internal Revenue Service might not be counted on for assistance.

“There’s no denying the fact that with a new tax law in place and a reduced workforce at the IRS, it’s been very difficult for the Service to meet the moment,” Thompson said.

If taxpayers are anxious about preparing their tax returns, even with a software program, he said, “I recommend going to a qualified preparer — at H&R Block, a qualified certified public accountant or what’s called an enrolled agent — if there’s any anxiety whatsoever.”

Many tax professionals get their returns prepared by others because of the reasonable cause defense.

“That means that if any qualified CPA or enrolled agent or IRS professional prepares a return and something goes wrong, then the taxpayer reasonably relied upon that professional,” Thompson said. “As such, there’s an argument that the taxpayer shouldn’t have to pay penalties and interest as a result.”

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