Ohh That's Rich - no tax on tips scam

[Figarosmom]

Last edited Thu Apr 16, 2026, 05:54 PM - Edit history (1)

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[PeaceWave]

1. A person can only deduct the full $25K for qualified tips if they make $150K or less...

At that point, the deduction begins to phase out. It would appear to me to be more of a middle class tax cut than something of benefit to the rich.

https://www.irs.gov/newsroom/what-the-no-tax-on-tips-deduction-means-for-you

[FoxNewsSucks]

2. Did anyone really think it would apply to

regular working Americans?

As you say, it's the rich.

Along with politicians and justices who get a "donation" in exchange for doing a favor. SCROTUS ruled that it's only a bribe if they get paid first. Afterward, it's a gratuity. That'll now just be called a tip also.

[Ms. Toad]

4. I'd hardly say that the people who are eligible for this particular deduction are rich.

It starts phasing out at $75,000 (for a single individual).

So yes, this particular deduction applies to regular working Americans - and (because of the phase out) wouldn't even be available to anyone falling into the category of rich.

[PeaceWave]

5. The phase out actually begins at $150K for individuals and $300K for married filing jointly...

Your point remains though. This isn't a tax perk for the "rich."

[Ms. Toad]

8. Thanks for the correction!

I was working on taxes yesterday and ran into a bunch of deductions in the same bill which phase out starting at $150,000. I assumed they were all the same without checking.

[Ms. Toad]

3. Apples and oranges.

While he does make a valid point that taking advantage of the deduction requires that you have taxable income, you hit that at about $7.50 an hour. If your employer pays you $7.50/hour and you make the rest in tips - up to $25,000, you pay zero income tax on that $25,000. A savings of around $3000.

Then he launches into all of the other increases in order to somehow turn this into a scam because the tax break for a few doesn't cover the increased cost of living for those same few. Apples and oranges.

I do have issues with the no tax on tips, because it favors one large, vocal, group of employees while not giving equivalent groups a similar tax break. But that doesn't make it a scam - it just forces us to fight each other for the same small pie (which giving a huge chunk of that pie to a group that would otherwise be fighting alongside us to make the pie bigger. But, again, that doesn't make it a scam. Just bad policy.

[Solomon]

6. I don't think its a dollar per dollar deduction of $25k.

There's a formula to figure out how much of that 25k escapes the tax but I don't think all of it does unless you have substantially more than 25k in tips.

[Ms. Toad]

9. It's a full deduction of the tip income up to 25,000.

You deduct it from income, rather than from taxes - so the reduction doesn't reduce taxes $1 for every $1 tipped.

The overtime deduction is a bit more nuanced. You can only deduct the amount extra you were paid for working overtime.

So for my daughter's overtime pay, I could only deduct 1/3, because the pay included the "time" she would have been paid anyway, as well as the "half" she was paid for being beyond the 40 hours/week. And employers didn't necessarily report it separately - so you have to have a stub which indicates it, and understand how they calculated it in order to figure out how much is actually deducted.

[PCB66]

7. My son makes quite a bit of money in tips

He is a Sommelier at a high end restaurant. He paid about $4,000 less in Federal Income Taxes this year because of the $25K deduction. He is a working guy that serves rich people. By the way, rich people tip generously.

Nowadays $4K is not a tremendous amount of money but that helped to add to our granddaughter's college fund.

[pansypoo53219]

10. + how much did the 0.5% percent like dim donnie get?