WASHINGTON—The Internal Revenue Service (IRS) finalized its "no tax on tips" regulation that exempts certain classifications of workers from being taxed on tips under $25,000.
Published to the Federal Register on Monday, the new IRS rule was engendered by the One Big Beautiful Bill Act, U.S. President Donald Trump's marquee domestic policy legislative package, which empowered the agency to promulgate rules and classifications that define certain occupations that receive tips as a part of their income.
The Federal Register is the official journal of the U.S. government, containing government agency rules, proposed rules and public notices.
Under the new rule, eligible taxpayers may claim "qualified tips" as a deduction on their income tax filings. According to the IRS, over 300 comments were submitted, and a public hearing was held last October. The final regulations are now in place.
“Taxpayers are already benefiting from No Tax on Tips since the IRS already is issuing refunds to eligible workers,” said Frank J. Bisignano, the chief executive officer of the Internal Revenue Service. "Given the wide variety of workers who recieve tips, these final regulations help implment an important tax benefit for American workers."
The "wide variety of workers" mentioned by Bisignano, however, does not include adult content creators or other tipped adult performers.
"The proposed regulations would have further excluded from the definition of qualified tips any amount received for prostitution services and any amount received for pornographic activity," the regulation reads. "Several commenters requested that the regulations define pornographic activity.
"The final regulations provide that amounts received for prostitution services and pornographic activity are not included in the definition of 'qualified tips,'" it specifies.
"The same businesses who are good enough to tax are apparently not entitled to the same tax relief as everyone else," observed Katherine Studley, a tax accountant and adult content creator, of the Only Consultant business services consultancy. Studley published an analysis on this topic through the Free Speech Coalition that AVN republished today.
"There is no checkbox on any 1099 to indicate content as pornographic," Studley argued. "This means vanilla creators on any platform can still technically qualify for this deduction."
She added, "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."
As AVN previously reported, tax officials at the IRS could be expected to define what constitutes online pornography—and adult content creators—in efforts to enforce the new rule.
The definition of what classifies as "pornographic" remains unclear. There is no clear indication in the final regulation, an omission that raises First Amendment concerns.
"The IRS guidance excludes income tied to pornographic activity from qualifying for the deduction," explained Corey Silverstein, an attorney specializing in adult industry clients. "As a result, even creators whose income resembles tipping in structure are denied access to the benefit.
"The practical effect is not a new tax burden, but a disparity: workers in other tipped industries receive a new tax advantage, while adult creators—many of whom rely heavily on tip-based income—do not," Silverstein continued. "This outcome reinforces ongoing concerns about unequal treatment of adult industry workers in financial and regulatory policy, particularly when similar forms of labor in other sectors are treated differently for tax purposes."
Lawrence Walters, another attorney specializing in adult industry clients, added that he is alarmed at the regulation's inconsistent nature.
"The puritanical nature of this rule is on full display," Walters said. "I expect that content creators who would otherwise qualify for the no-tax-on-tips provision but for the nature of their artistic expression will challenge this rule as an infringement of First Amendment rights, arbitrary, and irrational."
He concluded, "The ongoing discrimination against the adult entertainment industry at the state and federal levels is shameful. Content creators engaging in lawful business activity involving constitutionally protected erotic materials should be treated equally with all other workers when it comes to tax relief."
