Are food preparation workers tips tax deductible in 2026?
Yes — food preparation workers are on the IRS tipped occupation list (code 106). 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 106 · Beverage and food service · official title: Food Preparation Workers
How tipping works in this job
In a deli, a sandwich counter or a coffee operation you are often working within sight of the customer and within reach of a tip jar or a card terminal prompt. In a production kitchen you are not, and any tips reach you only if the house pool includes prep. Which of those two situations you are in tends to make the difference between a meaningful tip figure and none at all.
The regulations say: Perform a variety of food preparation duties other than cooking, such as preparing cold foods and shellfish, slicing meat, and brewing coffee or tea. Examples given: Salad maker, sandwich maker, fruit and vegetable parer, kitchen steward.
The thing most likely to disqualify your tips
Assuming a share of the counter jar is automatically yours to deduct. It qualifies only to the extent it was actually distributed to you and reported — a jar counted at close and split informally, with nothing recorded, leaves you with a number you cannot substantiate if the return is questioned.
Check your own numbers
Pre-filled for food preparation workers. Runs entirely in your browser — nothing is uploaded.
Step 1 — your occupation
Checking for Food preparation workers (Treasury code 106). 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: Assuming a share of the counter jar is automatically yours to deduct. It qualifies only to the extent it was actually distributed to you and reported — a jar counted at close and split informally, with nothing recorded, leaves you with a number you cannot substantiate if the return is questioned.
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 food preparation workers
Whether you can see customers decides almost everything about this occupation. A prep cook who arrives at five in the morning to break down cases and portion proteins will finish a shift without meeting anyone who might tip. Someone building sandwiches at a deli counter, assembling bowls at a fast-casual line, or working a juice bar is within arm’s reach of a jar and a payment terminal all day. Both are code 106, and their realistic annual tip figures differ by an order of magnitude.
Kitchen stewards are the clearest example of the invisible half. The code covers them explicitly, and they are essentially never handed anything directly — inclusion in a house pool is the only route by which tips reach the role at all. If your restaurant does not extend its pool that far, the honest answer is that you have an occupation code and no qualifying tips, which is a legitimate outcome rather than a mistake.
For those on the visible side, the practical difficulty is that counter money is genuinely hard to pin down. A jar emptied at close and divided informally between four people produces a real figure that exists in nobody’s records. Terminal tips are better: they run through the card system and normally reach you through payroll, which puts them on your W-2 with the occupation code in box 14b. If your shop handles the jar the same way — declaring it as a tip distribution — your whole figure becomes documented rather than remembered.
Many prep workers cover both worlds inside one job, doing morning prep and then a counter shift. If that is you, expect your annual tip income to come almost entirely from the counter days, and be wary of estimating a year by multiplying a typical week. Weeks in this occupation are not typical of each other.
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 food preparation workers on the IRS tipped occupation list?
- Yes. Food Preparation Workers is Treasury Tipped Occupation Code 106, in the beverage and food service category. The regulations describe it as: Perform a variety of food preparation duties other than cooking, such as preparing cold foods and shellfish, slicing meat, and brewing coffee or tea.
- What is the most common reason food preparation workers lose the deduction?
- Assuming a share of the counter jar is automatically yours to deduct. It qualifies only to the extent it was actually distributed to you and reported — a jar counted at close and split informally, with nothing recorded, leaves you with a number you cannot substantiate if the return is questioned.
- 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
- 107
Fast food and counter workers
You serve customers at a counter — taking orders, making drinks, handing food over, taking payment.
- 108
Dishwashers
You run the dish pit — washing dishes, glassware, utensils and kitchen equipment.
- 109
Restaurant host staff
You greet guests, manage the book and the floor, and seat people.
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.