The following overview of the new IRS “No Tax on Tips” provisions was by FSC member Katherine Studley of the Only Consultant. The overview is prepared for informational purposes only. Each person’s business and tax situation varies. Always consult your tax professional prior to making any decisions related to tips or other tax or accounting matters.
Yesterday the IRS published its final regulations on the “No Tax on Tips” provision. If you receive tips in any capacity it’s likely you’ve seen headlines about this. The provision is part of the One Big Beautiful Bill Act signed in July of 2025 and is meant to benefit taxpayers who traditionally received tipped income before December of 2024. The IRS released proposed guidance in September 2025, took public comments and has now finalized everything this week. I’ve been watching this closely since it directly affects the community I serve and the final rules landed exactly as I feared they would.
To be clear, this isn’t a full exemption. It’s a federal income tax deduction up to $25,000 per year in tips can be subtracted from taxable income when you file taxes. It applies to tax years 2025 to 2028 and phases out if your adjusted gross income exceeds $150,000 ($300k if you’re married filing jointly, if filing married separately, you do not qualify at all). Taxpayers still need to pay the full 15.3% of self-employment tax and potentially state tax depending on where you live.
Digital content creators of all kinds, influencers, streamers, podcasters, were explicitly listed under the initial Treasury Tipped Occupation Code 209 which felt like a win for the community. That was until a coalition of conservative and Christian organizations wrote directly to Treasury Secretary Scott Bessent urging him to remove sexually explicit material and named the OnlyFans platform specifically. Their efforts were effective. The final regulations now plainly state “any amount received for pornographic activity is not a qualified tip”. No acknowledgement that these are legal businesses operated by legal workers who have been paying their taxes. The same businesses who are good enough to tax are apparently not entitled to the same tax relief as everyone else.
This is not a ban at a platform or individual level but is based on the nature of the content at the time the tip is received. There is no checkbox on any 1099 to indicate content as pornographic. This means vanilla creators on any platform can still technically qualify for this deduction. If an adult creator were to claim it and be selected for examination, a human IRS agent would need to evaluate whether the tips were connected to pornographic activity based on facts and circumstances with no formal definition to guide them. This is a morality-based exclusion and is becoming a pattern.
The states are falling in line.
Alabama — 10% tax on gross receipts from adult website content produced or sold in the state, in effect since September.
Pennsylvania — bipartisan proposal for a 10% tax on subscriptions and purchases from online adult content platforms, introduced October 2025. This is in addition to the 6% sales tax already in affect.
Utah — SB73 signed into law March 20, 2026, imposing a 2% excise tax on online pornography companies with AI-assisted enforcement
Florida – hasn’t passed anything yet but a gubernatorial candidate is actively campaigning on a 50% income tax on OnlyFans creators
It’s a coordinated economic squeeze using tax policy, age verification and platform liability to make adult content creation financially unsustainable without a single federal ban.
However, there are opportunities for creators to maximize the deduction, but it requires intentional record keeping and an understanding of the laws. Adult creators are not banned as a category of person and the tip is tied to the content. This is advantageous for creators operating across multiple platforms and producing mixed content. If you’re an adult creator who also streams on Twitch, goes live on Tiktok and is active on YouTube, you have a vanilla presence and the tips receive on those platforms are separate from anything tied to the “spicy” industry. It is possible to deduct the tips from a non-explicit presence.
Exotic dancers are in a different position and it’s worth mentioning. They remain on the IRS’s official qualifying occupation list under Entertainment and Events and that held through the final regulations. The exotic dancing industry faces a different issue in that clubs are not doing complete wage reporting so it’s difficult to prove what is income and what is a tip. From what I’ve seen in preparing dancer tax returns, I don’t anticipate clubs to report qualifying tips on 1099s or W-2s. The new “applicable law” language in the final regulations means that local counties could technically disqualify the tips in jurisdictions where certain conduct during performances is restricted. However, the occupation level eligibility is there.
None of this is fair or a surprise to the community. All we can do is continue to pay attention, document as much as possible and support organizations like Free Speech Coalition who are fighting the legislation. If you have any questions or comments regarding this deduction or any nuances for adult industry tax preparation do not hesitate to reach out to me directly at [email protected].