It is April 28, 2026. On April 10th, the IRS issued IR-2026-49, finalizing the regulations for the “No Tax on Tips” provision of the OBBBA. This is a major win for service-based LLCs (consulting, technical support, hospitality).
1. Who Qualifies for Tip Exclusion?
- The Rule: Workers in specific “customary” occupations are now exempt from federal income tax on tip income, provided the LLC maintains the new Section 127 educational assistance FAQs (Article #570) and proper digital tracking.
- The Catch: The LLC must still pay the employer-share of FICA, but the employee’s take-home pay increases significantly, aiding in Article #586 (Talent Retention).
- The Shark Insight: “This is your 2026 recruitment secret weapon. If you run a service LLC, highlight the ‘No Tax on Tips’ benefit in your hiring ads. It’s a government-subsidized raise for your staff that costs you almost nothing to implement.”