💰No Tax on Tips....well sort of.
Trump made a promise to the Vegas peeps: "no tax on tips." And that's technically true for some of you, but not all of you.
Unfortunately like most tax promises, the devil's in the deductions. The $25K tax-free treat comes with strings attached.
So, here are the limitations, conditions, and carve-outs:
🤑 First $25,000 of tips: tax-free
↳ Baristas win.
↳ Bottle service girls? No so fast (see below)
🚧 Here are three hurdles you’ll need to clear:
💰Income Limits
↳ Single filers: keep it under $150K.
↳ Married filers: under $300K.
↳ Make more than that? Congrats, you’re too successful for tax relief (i.e. no tax-free tip for you.)
💸Must be a "Customarily Tipped Occupation"
↳ The IRS came up with a list of 68 jobs that qualify.
↳ Why 68? Who knows. Probably the same folks who thought “Form 8919” was a sexy name.
↳ Spoiler: CPAs didn’t make the list (rude).
🧑⚖️Your employer can't be an SSTB
↳ SSTB = Specified Service Trade or Business.
↳ Translation: your boss can’t be in one of the “bad” industries the IRS frowns upon.
↳ Sounds like a scandal. Reads like something you catch on spring break.
🧾Romeo, what are SSTBs?
SSTBs (Specified Service Trades or Businesses) are basically the IRS’s version of “You’re successful, so we don’t trust you.”
These are the fields where your business depends on your skill or reputation, so they don’t get the full QBI deduction, and now they’re cut out of tax-free tips too.
Here's the most common list of SSTBs:
↳ 🧑⚕️ Health - doctors, dentists, etc.
↳ 👩⚖️ Law - attorneys, legal Consultants, etc.
↳ 🧮 Accounting - bookkeepers, CPAs🤬, etc.
↳ 📊 Consulting - strategists, marketers, etc.
↳ 📉 Financial Services - financial planners, advisors, wealth managers
↳ 🧑🏫 Education - tutors, instructors, test prep coaches
↳ 🎭 Performing Arts - actors, musicians, other poor liberal arts people
↳ 📷 Athletics - Coaches, trainers, professional athletes
↳ 💼 Reputation Fame-Based Services - influencers, authors, speakers
In other words, if you are employed by a doctor, and you get a tip from a customer, because your boss is an SSTB, you don't get the tax-break on tips.
So basically, in the IRS’s eyes, it’s not about who earned the tip, it’s about who signs your paycheck.
Because nothing says “tax relief” like punishing you for your employer’s ambition.