Entering OBBB qualified tips during a pay run

"No tax on tips" is a federal income tax deduction introduced in the One, Big, Beautiful Bill in 2025. The deduction allows tipped employees to reduce their year-end federal income tax liability (up to $25,000 per individual) when they file their taxes for tax years 2025–2028.

More help articles and federal resources about this bill→

Reporting requirements for tax years 2026-2028

For tax year 2025, employers were allowed to approximate qualified tip amounts for employees.
However, for tipped employees to be able to claim a deduction on qualified tips earned in tax years 2026-2028, employers are required to report qualified tip amounts on each employee's pay stub, as well as on year-end forms.

To do this, you'll need to:

Select "Yes" under "OBBB Eligible" in Company Preferences*
Enter a Treasury Tipped Occupation Code (TTOC) in each tipped employee's profile
Enter OBBB Qualified Tip amounts during each pay run

Select "Yes" under "OBBB Eligible" in Company Preferences

In the Company tab, select Company Preferences.

Under "OBBB Eligible", select "Yes". This adds the "TTOC" selection menu to employee profiles, and adds OBBB reporting fields for qualified tips. This will also allow you to enter qualified overtime pay during pay runs, if needed.

Don't see this option?
If you don't see this "OBBB Eligible" selection in Company Preferences, contact our support team for help. We may need to upgrade your payroll process to include this feature.

Enter a TTOC in tipped employee's profiles

To report qualified tips on employee pay stubs, you'll first need to provide a Treasury Tipped Occupation Code (TTOC) for each tipped employee. This can be done in their employee profile.

In the employee profile, click Tax Withholding.

Under "Federal Withholding", click in the field labelled "TTOC for OBBB Tip Deduction".

You can enter or search for the correct Treasury Tipped Occupation Code for each employee.
See a full list of qualifying occupations, with job descriptions, at Treasury.gov→

Enter qualified tipped wages when running payroll

The below instructions demonstrate entering qualified tipped wages using the Improved Pay Run. If you haven't upgraded yet, select "See instructions using Legacy Pay run".

For a tipped employee to claim a deduction on tip income during tax years 2026-2028, qualified tip amounts must be reported on each paystub they receive throughout each year, as well as their W-2 at the end of the year.

If you've paid tipped employees before, you already know how to add tips when entering hours. When running payroll, click the edit pencil in the Wages column to add tips for an employee.

Because you've selected "Yes" under "OBBB Eligible" in Company Preferences, you'll see a new column for "OBBB Qualified Tips ($)". If you've entered or imported overtime hours for an employee, you'll also see a column for "OBBB Qualified OT (hr)".

IMPORTANT:
You must enter an amount in "Cash Tips" or "Controlled Tips" before entering an amount in "OBBB Qualified Tips". This also applies to "Overtime" and "Double Overtime" when entering "OBBB Qualified Overtime".

Start by entering tip amounts for the employee as either "Cash Tips" or "Controlled TIps".

WARNING:
Do not use custom pay items to report tips. Only "Cash Tips" and "Controlled Tips" may be used to report qualified tips.

Once you've entered the employee's tips, you can enter the amount of these tips that are qualified for the deduction under OBBB.

This applies to both cash and controlled tips.

Note:
In the above example, Shelley earned a total of $100 in tips ($50 in cash tips, $50 in controlled tips). The full amount of these tips qualify, and this is reflected by entering the full amount in the "OBBB Qualified Tips" field.

Accounting for tips that don't qualify under OBBB

Tips that don't qualify for the deduction can't be included in the "OBBB Qualified Tips" field. In the example below, Katy earned $100 in tips, $25 of which was applied automatically to a customer's bill. Because this $25 was non-negotiable, it doesn't qualify for the deduction, and is subtracted from the amount entered into the "OBBB Qualified Tips" ($100 - $25 = $75).

If an employee has OBBB Qualified Tips entered, but does not have a TTOC selected in their profile, you'll need to enter their code here before you can complete the pay run.

Click Preview Check to see how these tips will appear on their pay stub.

Note that the total Cash Tips is $100, OBBB Qualified Tips is $75, and subject wages is $100. The OBBB Qualified Tip amount is still included in subject wages, so it can be claimed for the deduction when they file their taxes.
For a tipped employee to claim a deduction on tip income during tax years 2026-2028, qualified tip amounts must be reported on each paystub they receive throughout each year, as well as their W-2 at the end of the year.

If you've paid tipped employees before, you already know how to add tips when their entering hours. When running payroll, click the edit pencil in the Wages column to add tips for an employee.

Because you've selected "Yes" under "OBBB Eligible" in Company Preferences, you'll see a field where you can enter "OBBB Qualified" Tips.

IMPORTANT:
You must enter an amount in "Cash Tips" or "Controlled Tips" before entering an amount in "OBBB Qualified Tips". This also applies to "Overtime" and "Double Overtime" when entering "OBBB Qualified Overtime".

Start by entering tip amounts for the employee as either "Cash Tips" or "Controlled TIps".

WARNING:
Do not use custom pay items to report tips. Only "Cash Tips" and "Controlled Tips" may be used to report qualified tips.

Once you've entered the employee's tips, you can enter the amount of these tips that are qualified for the deduction under OBBB. This applies to both cash and controlled tips.

Note:
In the above example, Anthony earned a total of $100 in tips. The full amount of these tips qualify, and this is reflected by entering the full amount in the "OBBB Qualified Tips" field.

Accounting for tips that don't qualify under OBBB

Tips that don't qualify for the deduction can't be included in the "OBBB Qualified Tips" field. In the example below, Anthony earned $100 in tips, $25 of which was applied automatically to a customer's bill. Because this $25 was non-negotiable, it doesn't qualify for the deduction, and is subtracted from the amount entered into the "OBBB Qualified Tips" ($100 - $25 = $75).

If an employee has OBBB Qualified Tips entered, but does not have a TTOC selected in their profile, you'll need to enter their code here before you can complete the pay run.

Click Preview Check to see how these tips will appear on their pay stub.

Note that the total Cash Tips is $100, OBBB Qualified Tips is $75, and subject wages is $100. The OBBB Qualified Tip amount is still included in subject wages, so it can be claimed for the deduction when they file their taxes.