Treasury made a viewer’s badge a deductible tip and their access fee ordinary income.

Begin with the test, because it is tighter than the slogan. IRC § 224(d)(2)(A) allows an amount as a qualified tip only where it is paid voluntarily, with no consequence in the event of nonpayment, not subject to negotiation, and determined by the payor. § 224(b)(1) caps the deduction at $25,000; § 224(b)(2) reduces it by $100 for every $1,000 of modified adjusted gross income above $150,000, double for joint filers; § 224(c) limits a sole proprietor to the income the business has left after its own deductions; § 224(f) requires a married taxpayer to file jointly; and § 224(h) kills the whole thing for taxable years beginning after 31 December 2028. It is an income-tax deduction and nothing else — self-employment tax is untouched, which is why the arithmetic below still hands over ten thousand dollars a year at the target.

Then the list, which is the part that makes this an occupation question rather than a payment question. The statute defines a qualified tip as a cash tip received in an occupation that customarily and regularly received tips on or before 31 December 2024, “as provided by the Secretary,” and Treasury’s published list runs 68 occupations under codes 101 to 809. Entry 209, under Entertainment and Events, is Digital Content Creators: “Produce and publish on digital platforms original entertainment or personality-driven content,” “such as live streams, short-form videos, or podcasts.” The final regulations expanded the list past 70, adding visual artists and floral designers to personal services and gas pump attendants to transportation. They also closed a door in the same breath: “platform hosting is not the equivalent of content creation and is not on the List of Occupations that Receive Tips.”

Now the empty paragraph, which is the finding. § 224(d)(2)(B) denies the deduction to tips received in a trade or business that is a specified service trade or business under § 199A(d)(2) — a list that includes the performing arts. For an employee the test runs on the employer’s business; for a self-employed creator it runs on their own, and a solo streamer or podcaster is exactly the taxpayer who cannot tell. Commenters said so, in the preamble’s words, that “the exclusion for tips received in a specified service trade or business creates uncertainties.” Treasury’s answer was to publish the rule without it: “The final regulations do not address the specified service trade or business exclusion under section 224” and “subsection (g) of § 1.224-1 is reserved.” So the government has told a creator which code they are, what a tip is, when a badge counts — and left blank the sentence that says whether any of it applies to them.

Before anyone gets clever, read the guardrail. The regulations deny tip treatment where, on all the facts, “the payments represent a recharacterization of wages or payments for services as tips,” and they set an irrebuttable presumption of exactly that in two cases: where an employee’s employer is the payor, and where the recipient has a direct ownership interest in the payor. Tipping yourself through your own company is not a plan, it is a presumption. Nor can a required payment be renamed: the voluntary, no consequence for nonpayment and not subject to negotiation tests in § 224(d)(2)(A) are doing the work, and a payment that unlocks a post fails all three at once.

Which leaves the rails, and this is where the money actually is. Patreon’s own fee page prices its current plan at “10% platform plan + applicable taxes” with card processing at “2.9% + 0.30USD per successful payment over $3,” a bank payout at $0.25 and a 2.5% currency conversion fee; the legacy Pro and Premium plans sit at 8% and 12%. Ko-fi states a “creator friendly 0-5% fee” and, more usefully, that payments go directly to the creator’s own PayPal or Stripe account and that Ko-fi “never processes or holds funds.” So on the tip rail the only certain take is the processor’s, and the processor charges a fixed 30 cents, which is the whole economics of small money: at $1 the all-in take is 32.90%, at $5 it is 8.90%, at $20 it is 4.40%. A zero-percent platform is not a cheap platform if the payments are small.

Put the two together at $5 a payment, for a single sole proprietor with no other income in 2026, and solve for $5,000 a month after federal tax. The tip rail with the deduction needs $81,853.99 of viewer money a year. The same rail with the deduction denied — which is what the reserved paragraph might mean — needs $87,170.20. Patreon’s membership rail, where the payment buys access and therefore can never be a tip, needs $97,918.68. The gaps price the two mechanisms separately: the reserved paragraph is worth $443.02 a month of viewer money, and the 10% platform fee is worth $895.71. The deduction is the smaller lever. That is the non-consensus reading: the headline everyone repeated is worth about half of the fee line nobody mentions, because § 224(b)(1) caps the tips at $25,000 while the platform takes its percentage on every dollar to the end of the book.

And the honest shape of the ladder. The entry here is not $500; it is closer to $0 — no licence, no examination, no filing, a free account and a processor that charges per payment. The binding input is the one no fee schedule prices: 1,364.23 payments of $5 a month on the tip rail, or 1,631.98 members at $5 on Patreon’s. The capital was never the gate on this route, which is precisely why it is the route where the number that matters is a count of people.