Most arguments about the tips deduction are really arguments about one payment. The final regulations (T.D. 10044) draw the lines like this. The detail below reflects those regulations as summarised across professional coverage of the final text; this site’s methodology page explains how each rule is sourced and checked.
Counts
Voluntary cash and card tips. A tip is qualified when the customer pays it voluntarily, chooses the amount, and does not negotiate it. Tips left on a card count, because the regulations treat charged tips as cash tips.
Your share of a tip pool. Amounts distributed to you through a tip pool or tip-sharing arrangement count for you, the receiving worker.
Anything above a mandatory charge. If a bill carries a mandatory service charge and the customer voluntarily adds more, the added amount is a qualified tip.
Does not count
Mandatory service charges and automatic gratuities. The 18 percent added to a large party’s bill is the restaurant’s charge, not the customer’s choice, so none of it is a qualified tip, even the part passed to staff.
Digital assets. Tips paid in cryptocurrency or other digital assets are not cash tips.
Tips through your own business interest. Amounts from a business you directly own 5 percent or more of do not qualify, and neither do amounts an employer pays dressed up as tips, or wages recharacterised as tips.
Managers’ pool shares. A manager or supervisor cannot claim amounts received through a tip pool, though a direct tip they personally earn while working in a listed occupation can qualify.
Tips for illegal activity. Tips connected with illegal activity, prostitution or pornographic activity are excluded entirely.
Once a payment passes these tests, it still needs a listed occupation and reporting. Check both in the tips calculator flow, starting with the occupation checker.