Summary
A new tax provision called "No Tax on Tips," part of President Donald Trump's pledge, lets tipped workers deduct up to $25,000 of their tips from federal taxable income. The deduction applies until December 31, 2028, and only affects federal taxes. Workers in jobs that typically get tips, like food service and hospitality, qualify for this deduction.
Key Facts
- "No Tax on Tips" allows tipped workers to deduct up to $25,000 from their federal taxable income annually.
- The provision is effective through December 31, 2028.
- It affects federal taxes only, not state or local taxes.
- The deduction phases out for individuals earning over $150,000 and married couples earning over $300,000.
- Qualified tips must be freely given and not negotiated or connected to illegal activities.
- The deduction applies to several job categories, including food and beverage service, entertainment, hospitality, home services, personal care, and transportation.
- The average estimated savings is around $1,300, according to a White House report.
