Santa Clauses get a tax break on tips, but not accountants or tax pros

Santa Claus impersonators are the latest beneficiary of Donald Trump's new tax break for tips.

The Treasury Department and IRS clarified on Friday that celebrity and character impersonators — including holiday party Santas — can deduct up to $25,000 in tipped wages from their taxes. 

Republicans established the tip deduction in last year's sweeping tax law but left the task of defining which professions qualify for the tax break to the Treasury. The department has taken an expansive approach with a final rule released Friday listing more than 70 occupations that can claim the deduction.

In response to questions raised in public comments, the IRS cleared up that Santa and other impersonators fall under the category of "entertainers and performers" and so are eligible to deduct tips from their tax bills.

The agency added visual artists to the list, specifically noting caricature artists and ice sculptors may deduct tipped income when they file their taxes this year. The final list also added floral designers and gas pump attendants, in a win for New Jersey, where customers can't legally pump their own gas.

Clergy members also may deduct any tips they collect for officiating events, such as weddings and funerals, under the rule.

So can horse groomers, which now qualify under an expanded category that includes both pet and "show animal" caretakers.

The final list also established tax parity between eyelash and eyebrow technicians. The IRS in an initial proposal released in September included eyebrow waxers and threaders, while the final rule clarified those dedicated to the extension or tinting of eyelashes may also claim the deduction.

In response to public comment, the IRS said it would not explicitly include intuition coaches, energy practitioners and meditation instructors on the list of qualified jobs. But the agency acknowledged those occupations may be eligible under the category of "self-enrichment teachers" or "sports and recreation instructors," depending on the facts and circumstances.

Final rules still left some professions out in the cold, including anyone who collects tips related to "illegal activities, pornography, and prostitution," over the objections of some public commenters. The IRS, however, didn't define pornography.

The prohibition extends to cannabis industry workers operating legally under state law, as federal bans remain in place, the IRS said. 

The final rule was also bad news for professionals helping others file their taxes. The IRS declined to include accountants or tax preparers as qualified occupations, despite support in public comments. Neither those professions nor chiropractors were customarily or regularly tipped before 2025, the agency said.