IRS Agents May Have To Sift Through X-Rated Content To Determine “No Tax On Tips” Claims

IRS agents could soon find themselves reviewing explicit material on platforms like OnlyFans as the agency works to determine who can claim a new tax break created in Donald Trump’s One Big, Beautiful Bill Act.

The sweeping legislative package, which included a “no tax on tips” provision, was passed by Republicans earlier this year and signed into law by Trump in July.

Although it does not eliminate taxes on tips entirely, it does create a significant deduction for people who earn them.

The deduction is capped at $25,000 and is available only to workers in occupations that “customarily and regularly” receive tips as an incentive to encourage them to earn more of their income this way.

To prevent employees from shifting regular pay into tips, the IRS and Treasury have placed limits on who can claim the benefit.

A proposed rule issued in September listed nearly 70 types of jobs that fall under that standard, including digital content creators, entertainers, performers, and dancers.

While the language initially appeared to open the door for those in the adult-content industry receiving tips from followers, that possibility was soon dismissed.

The Trump administration confirmed that tips linked to prostitution or “pornographic activity” will not be eligible for the tax deduction.

However, the rule is still expected to require audits of creators who report tips earned on adult sites like OnlyFans.

That would mean IRS agents would have to watch a creator’s content, decide whether it crosses into pornography, and determine whether their tips qualify for the deduction limit.

“Ultimately, it would be the subjective determination of an IRS examiner or a Tax Court judge,” tax preparer Thomas Gorczynski told The New York Times.

“Sometimes you look at something and it’s clearly pornography, but sometimes you look at something and you think, ‘Eh it’s subjective. Somebody might be really into it.’”

Similarly, accountant Katherine Studley, who represents numerous OnlyFans creators, told the NYT that being on OnlyFans does not mean the content is pornographic, and the language about who cannot claim is too vague.

“Where’s the line?” she said. “Just because you’re on OnlyFans, that doesn’t necessarily mean it’s pornographic. You could have a cooking channel or a yoga channel.”

The divide between what is considered pornographic and what is simply sexual in nature has perplexed courts and lawmakers for decades.

In 1964, Supreme Court Justice Potter Stewart declined to write a formal definition and instead said, “I know it when I see it.”

According to the NYT, justices at the time viewed the disputed material themselves as part of First Amendment cases.

For some content creators, the debate over OnlyFans tips may not even matter.

Financial professionals told the NYT that several of their clients make more than the income limit for the tips deduction, which begins to shrink for single earners making above $150,000 and joint earners making more than $300,000.

The pornography exclusion was urged by a coalition of socially conservative and Christian groups.

In a letter to Treasury Secretary Scott Bessent before the regulations were released, several organizations argued that “our government should not give tax breaks to predatory industries that profit from exploiting young men and women, destroying marriages, families, and lives.”

Days after that letter circulated publicly, the Treasury added the restriction to the proposed rules.

While OnlyFans creators could find themselves locked out of the new benefit, recent figures show that the industry is booming.

The company reported $7.22 billion in gross revenue for fiscal year 2024, with net revenue up eight percent at $1.41 billion.

The public filings also revealed that there were more than 4.6 million content creators on the site – an increase of 13 percent – and over 337 million fan accounts.

It is not clear how many of those accounts are based in the U.S.