No Tax on Tips Explained: Your Common Questions Answered
Description
The “No Tax on Tips” provision in the new federal spending bill creates a special deduction for tipped workers, lowering what they owe in federal income tax starting in 2025. But tips are still subject to state and local income taxes as well as payroll taxes (Social Security and Medicare).
In this episode, Ara Oghoorian explains who qualifies, what counts as qualified tips, the $25,000 deduction limit, and the income phase-outs, based on the latest IRS update.
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