Are fast food and counter workers tips tax deductible in 2026?
Yes — fast food and counter workers are on the IRS tipped occupation list (code 107). Tips in this job are deductible for 2026, up to $25,000, if the customer chose the amount and could have declined.
Treasury Tipped Occupation Code 107 · Beverage and food service · official title: Fast Food and Counter Workers
How tipping works in this job
Counter tipping changed shape when card terminals started asking. A large share of a barista’s tips now arrives through the tip prompt on the screen, pooled across the shift and paid out through payroll, which at least means it is documented. Cash still lands in the jar and still needs reporting to be deductible.
The regulations say: Serve customers at counter or from a steam table. Perform duties such as taking orders and serving food and beverages. May take payment. May prepare food and beverages. Examples given: Barista, ice cream server, cafeteria server.
The thing most likely to disqualify your tips
The difference between the tip screen and a fee. A terminal offering 15/18/20% or “no tip” is presenting a genuine choice, so those amounts qualify. A line item added automatically — a kitchen appreciation fee, a wellness surcharge, a fixed service charge on catering orders — does not, even if the shop distributes it to staff exactly like tips.
Check your own numbers
Pre-filled for fast food and counter workers. Runs entirely in your browser — nothing is uploaded.
Step 1 — your occupation
Checking for Fast food and counter workers (Treasury code 107). This occupation is on the list.
Step 2 — is it actually a tip?
Answer for the money you are asking about. If some of your income is tips and some is service charges, run them separately.
Step 3 — your tips and income
The phase-out runs on modified AGI, which for most people is the same as AGI.
3 questions left to answer.
OBBBA Deductions · obbbadeductions.com
Tips deduction worksheet — tax year 2026
The three tests, as answered
- Does the customer decide the amount? not answered
- Can the customer decline to pay it? not answered
- Is it a mandatory service charge or auto-gratuity? not answered
Answer the 3 remaining questions above for a result.
Watch out for this in your job: The difference between the tip screen and a fee. A terminal offering 15/18/20% or “no tip” is presenting a genuine choice, so those amounts qualify. A line item added automatically — a kitchen appreciation fee, a wellness surcharge, a fixed service charge on catering orders — does not, even if the shop distributes it to staff exactly like tips.
Educational estimate only, not tax advice. It runs entirely in your browser and nothing you type is sent anywhere. The deduction is scheduled to expire after tax year 2028.
How this applies to fast food and counter workers
Counter service was barely a tipped occupation fifteen years ago and is now substantially one, almost entirely because of the payment terminal. When a customer taps a card and the screen asks whether they would like to add 15, 18 or 20 percent, they are being given a genuine choice with a genuine option to decline — which is exactly what the regulations require. Those amounts qualify, and because they run through the card system they are also documented, which puts baristas and counter staff in a better evidentiary position than most tipped workers.
The tip jar is the other half, and it is the half that goes missing. Coins and notes counted at close and split across whoever worked the shift produce a real figure that no system records. Whether you can deduct it depends entirely on whether it was reported. Many shops now run the jar through payroll as a declared tip distribution; if yours does not, the number exists only if someone writes it down.
Where this occupation gets genuinely confusing is the growing set of line items that are not tips but look like them on a receipt. A kitchen appreciation fee, a wellness surcharge, a living wage fee, a fixed service charge on catering orders — several of these were introduced by operators specifically so that staff would be paid better, and they are still not qualifying tips, because the customer had no choice about paying them and no say in the amount. A shop can distribute every cent of a wellness surcharge to its baristas and none of it becomes deductible.
If your store does large catering or mobile-cart orders, expect those to carry a contracted service percentage. Run the two streams separately in your head: terminal tips and jar money on one side, anything added automatically to an order on the other. Only the first side is code 107 qualifying tip income.
The three tests, whatever your job
Paid voluntarily
The customer sets the amount and can decline to pay it.
Paid in cash or a cash equivalent
Card payments and mobile payments count.
Received directly or through a tip pool
Both routes qualify.
Questions
- Are fast food and counter workers on the IRS tipped occupation list?
- Yes. Fast Food and Counter Workers is Treasury Tipped Occupation Code 107, in the beverage and food service category. The regulations describe it as: Serve customers at counter or from a steam table. Perform duties such as taking orders and serving food and beverages. May take payment. May prepare food and beverages.
- What is the most common reason fast food and counter workers lose the deduction?
- The difference between the tip screen and a fee. A terminal offering 15/18/20% or “no tip” is presenting a genuine choice, so those amounts qualify. A line item added automatically — a kitchen appreciation fee, a wellness surcharge, a fixed service charge on catering orders — does not, even if the shop distributes it to staff exactly like tips.
- How much of my tips can I deduct?
- Up to $25,000 per return, whatever your filing status. The cap applies first, then the amount is reduced by $100 for every $1,000 of modified adjusted gross income above the threshold for your filing status.
- Does a mandatory service charge count as a tip?
- No. A mandatory service charge or automatic gratuity is not a qualifying tip, and the final regulations confirmed this explicitly. It does not qualify even when the customer cannot decline it — a qualifying tip has to be an amount the customer chose to give.
Related occupations in beverage and food service
Occupation data transcribed from T.D. 10044 — final regulations on occupations that customarily and regularly received tips, Treas. Reg. § 1.224-1(h) table 1, last verified 2026-09-08. Read the regulations.