Do Nurses Qualify for the Tips Deduction in 2026?

Nurses sometimes receive tips, gifts, or monetary tokens of appreciation from grateful patients and their families. With the IRC Section 224 tips deduction allowing W-2 employees to deduct up to $25,000 in qualified tips, some nurses have asked whether they can claim this benefit. The short answer is that most nurses likely do not qualify, because nursing is not traditionally classified as a "customarily tipped occupation" under IRC Section 45B. However, the IRS has not published a definitive occupation list, leaving some uncertainty. This post examines the occupation test, the historical context, and what nurses should consider before claiming.

The customarily tipped occupation test

The IRC Section 224 deduction is not available to all employees who happen to receive tips. It requires that the employee work in an occupation where tipping is customary, as defined under IRC Section 45B. The term "customarily tipped" refers to occupations where customers routinely and voluntarily leave gratuities as part of the service transaction.

Classic examples include restaurant servers, bartenders, hairstylists, taxi drivers, hotel bellhops, valets, and baristas. In these roles, tipping is an expected part of the compensation structure, and both the worker and the customer understand that gratuities are standard.

The test is occupation-based, not income-based. It does not matter how much you receive in tips. What matters is whether your occupation is one where tipping is a customary practice.

Is nursing a customarily tipped occupation?

In the traditional sense, no. Nursing is a professional healthcare occupation where compensation comes from salary or hourly wages paid by a healthcare facility. Patients do not customarily tip their nurses as part of receiving care. In many hospitals and healthcare systems, policies explicitly discourage or prohibit staff from accepting tips or gifts from patients.

When patients do give a nurse a monetary gift, it is typically an expression of gratitude for exceptional care, not a customary gratuity in the way a restaurant diner tips a server. The social expectation is fundamentally different: no patient expects to calculate a percentage for their nurse the way they would for a meal.

This distinction matters because IRC Section 45B, which defines "customarily tipped," was originally written in the context of the employer tip credit for food and beverage establishments. The legislative history and IRS guidance have consistently focused on service industries where tipping is a standard, expected component of compensation.

Historical IRS guidance on tipped occupations

The IRS has long maintained guidance on tip reporting for specific industries. The Tip Rate Determination and Education Program (TRDEP) and its related agreements (TRDA, TRAC, EmTRAC) have historically focused on:

• Food and beverage establishments (restaurants, bars, cafeterias)
• Hotels and lodging (bellhops, housekeepers, concierge)
• Personal services (hairstylists, barbers, spa workers)
• Transportation (taxi drivers, valets, parking attendants)

Healthcare workers, including nurses, do not appear in any of these historical IRS tip reporting frameworks. This absence is significant: it suggests the IRS has never considered nursing to be a customarily tipped occupation for federal tax purposes.

That said, the IRS has not yet published formal guidance specifically listing which occupations qualify for the Section 224 deduction. Future regulations or revenue rulings could potentially expand the list beyond the historically recognized categories. Until such guidance is issued, there is genuine uncertainty for occupations that fall outside the traditional tipped categories.

The risk of claiming on an unclear occupation

A nurse who claims the tips deduction would need to defend the position that nursing is a customarily tipped occupation. Given the historical IRS framework and the social norms around healthcare compensation, this would be a difficult position to support in an audit. The potential consequences include:

• The deduction being disallowed, resulting in additional tax owed plus interest
• Potential accuracy-related penalties if the IRS determines the position lacked reasonable basis
• The cost and time of responding to an IRS examination

For these reasons, claiming the tips deduction as a nurse carries meaningful risk. The conservative approach is to not claim it unless and until the IRS issues guidance that specifically includes healthcare workers.

What nurses can do instead

While the tips deduction is likely unavailable, nurses may benefit from other OBBBA provisions:

• Overtime deduction (IRC Section 225): Many nurses work significant overtime. If classified as FLSA non-exempt (as many RNs and LPNs are under certain state laws), the overtime premium qualifies for deduction up to $12,500(single) or $25,000(MFJ) per year. Nurses who regularly work 12-hour shifts and pick up extra shifts may find this deduction more relevant than the tips deduction.
• Senior bonus deduction: Nurses aged 65 and older may qualify for the $6,000senior bonus deduction, subject to MAGI limits.

For nurses interested in the overtime deduction, use the no tax on overtime calculator to estimate potential savings. For the tips deduction eligibility rules, see the no tax on tips calculator and the qualified tips glossary entry.