"No Tax on Tips" meant for low income taxpayers so most of the major digital creators won't qualify.
Low income digital creators can deduct upto 25k in tips, so if their income from tips and other sources is below $150k a year, their taxable income will be 25k less.
Truly bizarre how this is playing out - was the digital creator carve out requested by the various right wing streamers that are part of Trumps’s core sycophant club? Doesn’t make any sense.
"No Tax On Tips" is so stupidly regressive and yet another addition to the complex tax law. Somehow we decided a waiter making 100k with tips needs more help than a stock worker at Walmart.
It isn't "no tax on tips" that's regressive, it's tips themselves. If tips are a gift, then they should be taxed as gifts are taxed. End tips and raise wages, and the taxes cease to be confusing or controversial.
For example, half of parents are transferring an average of $1,500/month, tax-free, to their adult children.* Why do they get to do this?
Or to take it to absurdity, why aren't my donations to charities taxed? What's the reason for the carveout? Should I instead donate earmarked cash to a charity that provides assistance to underpaid waitstaff?
If it's free for all users, and you don't provide any benefit to those "tipping", it's already an untaxed gift in the US, if no individual gifts more than $19,000, and even then, the gift giver would pay any taxes. Tips require a customer relationship to exist.
I don't like the idea of even more expectations for tips, since we're already tip-fatigued. Despite that, I'd rather have less rules and taxes and have them actually enforced than have a situation where people pocket the cash portion of their tips untaxed anyway, which only punishes honest people.
"no tax on tips" was a pandering move to the mostly financially-illiterate populace that still don't understand progressive tax systems. Singling out certain types of income makes no sense and is very unfair. I wouldn't be surprised if this actually ends up resulting in less tip income over the long term due to people going "wait my income is taxed but theirs isn't, why should I tip as much?"
> New deduction: Effective for 2025 through 2028, employees and self-employed individuals may deduct qualified tips received in occupations that are listed by the IRS as customarily and regularly receiving tips on or before December 31, 2024, and that are reported on a Form W-2, Form 1099, or other specified statement furnished to the individual or reported directly by the individual on Form 4137.
I think one aspect that is understated: "No Tax on Tips" is only a deduction for the purposes of federal income tax. W-2 workers still owe FICA and other payroll taxes on such income, and similarly self-employed workers would still owe self-employment tax.
To me, a more appropriate name is "Some taxes on tips".
"Would you like to leave a tip for your server?"
"20%."
"And the cook?"
"What?"
"The cook wants in on the no-tax-on-tips so we're asking how much you'd like to tip him. We're also going to ask for the cleaner and the guy who delivered the ingredients earlier this morning."
Great, another way companies can offload the responsibility of looking after their staff to the customer.
It sounds like a win for the employee, "ah but you don't need to pay tax on your tips". But in reality it's government saying "The company you work for owes you nothing, take it from the customer".
American tipping culture has its origins in the post-Civil-War south:
> Following the Civil War and the abolition of slavery, formerly enslaved Black workers were often relegated to service jobs (e.g., food service workers and railroad porters). However, instead of paying Black workers any wage at all, employers suggested that guests offer Black workers a small tip for their services. Thus, the use of tipping to pay a worker’s base wage, instead of as a bonus on top of employer-paid wages, became an increasingly common practice for service sector employment. In the early 20th century, these employers, who shared a common goal of keeping labor costs down and preventing worker organizing, formed the National Restaurant Association (NRA). Over the past century, the NRA has lobbied Congress to achieve these goals, first by excluding tipped occupations from minimum wage protections entirely, and later by establishing permanent subminimum wages for tipped workers (One Fair Wage 2021).
> The act also provides that tips do not qualify for the deduction if they are received “in the course of certain specified trades or businesses — including the fields of health, performing arts, and athletics,”
So buskers have to declare their tips, but servers don't?
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[ 0.15 ms ] story [ 61.9 ms ] threadLow income digital creators can deduct upto 25k in tips, so if their income from tips and other sources is below $150k a year, their taxable income will be 25k less.
For example, half of parents are transferring an average of $1,500/month, tax-free, to their adult children.* Why do they get to do this?
Or to take it to absurdity, why aren't my donations to charities taxed? What's the reason for the carveout? Should I instead donate earmarked cash to a charity that provides assistance to underpaid waitstaff?
[*] If you didn't hear that the other half are getting this, now you know: https://www.savings.com/insights/financial-support-for-adult...
And yet, in today’s America that’s the major economic policy of the leader of the Republican Party.
Like "No Tips".
Pay your employees, pay your taxes.
No nonsense on dividing tips between people that I did not interact with, minimum tipping, or with automated machines.
Tipping also means that if I want to know how much I'll spend in your restaurant I will have to decide how much I tip even before I walk in.
This is all just tax evasion with extra steps, enabling exploiting of people that have less contractual power.
> New deduction: Effective for 2025 through 2028, employees and self-employed individuals may deduct qualified tips received in occupations that are listed by the IRS as customarily and regularly receiving tips on or before December 31, 2024, and that are reported on a Form W-2, Form 1099, or other specified statement furnished to the individual or reported directly by the individual on Form 4137.
* https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-...
There's also a maximum of $25k/year (~$2k/mo).
To me, a more appropriate name is "Some taxes on tips".
"And the cook?" "What?"
"The cook wants in on the no-tax-on-tips so we're asking how much you'd like to tip him. We're also going to ask for the cleaner and the guy who delivered the ingredients earlier this morning."
It sounds like a win for the employee, "ah but you don't need to pay tax on your tips". But in reality it's government saying "The company you work for owes you nothing, take it from the customer".
> Following the Civil War and the abolition of slavery, formerly enslaved Black workers were often relegated to service jobs (e.g., food service workers and railroad porters). However, instead of paying Black workers any wage at all, employers suggested that guests offer Black workers a small tip for their services. Thus, the use of tipping to pay a worker’s base wage, instead of as a bonus on top of employer-paid wages, became an increasingly common practice for service sector employment. In the early 20th century, these employers, who shared a common goal of keeping labor costs down and preventing worker organizing, formed the National Restaurant Association (NRA). Over the past century, the NRA has lobbied Congress to achieve these goals, first by excluding tipped occupations from minimum wage protections entirely, and later by establishing permanent subminimum wages for tipped workers (One Fair Wage 2021).
From https://www.epi.org/publication/rooted-racism-tipping/
So buskers have to declare their tips, but servers don't?