diff --git a/src/libs/actions/IOU.js b/src/libs/actions/IOU.js
index 0f255aec47b2..f286be99b047 100644
--- a/src/libs/actions/IOU.js
+++ b/src/libs/actions/IOU.js
@@ -213,6 +213,13 @@ function setMoneyRequestTag_temporaryForRefactor(transactionID, tag) {
     Onyx.merge(`${ONYXKEYS.COLLECTION.TRANSACTION_DRAFT}${transactionID}`, {tag});
 }
 
+/*
+ * @param {String} transactionID
+ */
+function resetMoneyRequestTag_temporaryForRefactor(transactionID) {
+    Onyx.merge(`${ONYXKEYS.COLLECTION.TRANSACTION_DRAFT}${transactionID}`, {tag: null});
+}
+
 /**
  * @param {String} transactionID
  * @param {Boolean} billable
@@ -3158,6 +3165,7 @@ export {
     resetMoneyRequestCategory,
     resetMoneyRequestInfo,
     resetMoneyRequestTag,
+    resetMoneyRequestTag_temporaryForRefactor,
     clearMoneyRequest,
     setMoneyRequestAmount_temporaryForRefactor,
     setMoneyRequestBillable_temporaryForRefactor,
diff --git a/src/pages/iou/request/step/IOURequestStepTag.js b/src/pages/iou/request/step/IOURequestStepTag.js
index f2f4d8df251b..41b6dbb367cf 100644
--- a/src/pages/iou/request/step/IOURequestStepTag.js
+++ b/src/pages/iou/request/step/IOURequestStepTag.js
@@ -64,7 +64,11 @@ function IOURequestStepTag({
      * @param {String} selectedTag.searchText
      */
     const updateTag = (selectedTag) => {
-        IOU.setMoneyRequestTag_temporaryForRefactor(transactionID, selectedTag.searchText);
+        if (selectedTag.searchText === tag) {
+            IOU.resetMoneyRequestTag_temporaryForRefactor(transactionID);
+        } else {
+            IOU.setMoneyRequestTag_temporaryForRefactor(transactionID, selectedTag.searchText);
+        }
         navigateBack();
     };