You may have seen a list of occupations that are eligible for the One Big Beautiful Bill’s “No Tax on Tips” provision. And perhaps your occupation is on that list, and you’re thinking, “Wonderful! My taxable income is going down!” Perhaps that’s the case, but there’s a chance that won’t be true.
The problem, one noted quickly by Tom Gorczynski (and I agree completely with Tom), is that there are two parts to qualify for this tax break. First, the occupation must be one where tips were customarily and regularly received prior to 2025. Second, the occupation must be one which is not a “Specified Service Trade or Business (SSTB).”
What is an SSTB? The Tax Cuts and Jobs Act (TCJA), the tax bill that passed during the first Trump Administration, allowed for a new deduction (the deduction for Qualified Business Income). However, certain businesses–called Specified Service Trade or Businesses–had limitations built into this deduction. Generally, if your business is one based on the reputation or skill of the employee or owner (such as attorneys, tax professionals, and consultants/personal coaches), you’re an SSTB.
If we look at the list published by Treasury, there are numerous SSTB occupations listed. For example, a tennis coach is clearly an SSTB. Sure, he may have receive tips but the second part of the test will disqualify that coach from receiving this tax benefit. (Of course, many of the occupations listed are absolutely not SSTBs, such as waiters, bartenders, and gaming dealers.)
I’d love to reclassify my business as a “Self-Enrichment Teacher;” that happens to be one of the professions listed on the list published by Treasury. Clearly, tax professionals help individuals keep more of their money; that’s absolutely self-enrichment. Unfortunately, changing the name of my business to “Clayton Self-Enrichment LLC” won’t change my profession. My dream of changing my billings from “Tax Preparation” to “Self-Enrichment Fee” will just not work.