SSTB Tip Deduction Guide
Understand the IRS transition relief for employees in listed tipped occupations and the limits of an SSTB classification.
For 2026 W-2 reporting, code TP is used for total cash tips reported to the employer. SSTB status does not create a separate tip code.
For 2026, Box 12 code TP reports total cash tips reported to the employer. There is no TS tip code in the 2026 W-2 instructions.
The law excludes tips received in a specified service trade or business (SSTB) from the individual tip deduction, but IRS Notice 2025-69 provides transition relief. During the relief period, employees in listed tipped occupations are treated as working outside an SSTB for this purpose, even when their employer is an SSTB.
The relief runs until January 1 of the first calendar year after final regulations addressing SSTB determination are issued. The April 2026 occupation regulations reserved that issue. Check for subsequent guidance before relying on relief for a later year.
A salon, spa or fitness business name alone is not enough to decide SSTB treatment. General section 199A classifications also do not by themselves answer how the tip deduction’s transition rules apply.
- Match each employee’s actual work to the official tipped occupation list.
- Keep reported cash tips and service charges separately in payroll records.
- Report required W-2 amounts without applying the employee’s personal deduction cap.
- Ask a tax professional about mixed activities or an individual deduction claim.
Sources: IRS Notice 2025-69, section 6; 2026 W-2 instructions. Reviewed October 8, 2026.
Educational federal reporting guidance, reviewed October 8, 2026. Sources: 2026 IRS W-2 instructions, Notice 2025-69, and DOL tip rules.
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