Quick HitsThe IRS has unveiled a proposed rule for the new “No Tax on Tips” deduction, which allows workers in tipped occupations to claim a tax deduction for “qualified tips” received. The proposed rule clarifies that “qualified tips” must be voluntarily paid and in cash, including cash, checks, electronic payments, and tokens such as casino chips. The “No Tax on Tips Provision,” effective 2025 through 2028, allows eligible employees and self-employed workers to deduct “qualified tips” received while working in occupations that customarily and regularly receive tips as specified by the IRS. Under the provision, eligible tipped employees, including those who itemize and do not itemize their taxes, can claim a tax deduction up to $25,000 per year. ‘Qualified Tips’The proposed rule further clarifies what constitutes “qualified tips,” broadly defined by the No Tax on Tips provision as voluntary cash or charged tips paid by customers or received through tip sharing.