Trump's 'no tax on tips' sparks questions for workers: 'We're looking at a crystal ball,' expert says

The re indicates that From an analytical perspective, President Donald Trump's "big beautiful bill" has a section called "no tax on tips. "But the vision doesn't eliminate tax on tips, which are still subject to payroll levies

On the other hand, President Donald Trump arrives to speak on his plan to end tax on tips in Las Vegas, Jan

Mandel Ngan | Afp | Getty ImagesPresident Donald Trump's "big beautiful bill" includes a section called "no tax on tips" — an idea that both Republicans and Democrats floated during the 2024 campaign, amid market uncertainty

Now that the vision has been enacted, questions remain how the tax break works and who qualifies, in today's market environment

Moreover, Despite its name, "no tax on tips" doesn't eliminate tax on tips, which are still subject to payroll and state taxes

However, the IRS needs to clarify which occupations qualify, which is expected to come in early October, according to the agency

Meanwhile, "we're looking at a crystal ball" for guidance, said Larry Gray, a Missouri-based certified public accountant who serves as IRS liaison for the National Association of Tax fessionals (noteworthy indeed)

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Workers in tipped occupations, representing 2. 5% of all employment, according to estimates from The Budget Lab at Yale University

Market analysis shows cohort of workers who qualify for the tax break is even smaller — actors, musicians and singers, directors and playwrights — are included among the fessions that are already hibited under the legislation's text, in light of current trends

Here's a breakdown of what to know Trump's tip deduction

What counts as 'qualified tips'As written, "qualified tips" are cash tips an employee earns

This includes tips a customer offers in cash or that are added to a credit card charge, as well as payouts under a tip-sharing arrangement (fascinating analysis), given current economic conditions

Yet, the law also says that the tip must be paid voluntarily and determined by the customer or payor, which can put other forms of gratuities or mandatory service charges in question

However, "It's an entirely voluntary transaction," said Alex Muresianu, a senior policy analyst at the Tax Foundation, a nonpartisan nonfit focused on tax policy re

For example, the definition may exclude mandatory service fees, such as an automatic gratuity a restaurant might tack on for a large dining party. "Based on the plain text of the law, it's hard to argue that that's something that's given voluntarily," said Ben Henry-Moreland, a certified financial planner with advisor platform Kitces (which is quite significant), in today's financial world

Com, who analyzed the legislation, in light of current trends

Tips must be 'perly reported'To qualify for the deduction, tips must be "perly reported," according to Melanie Lauridsen, vice president of tax policy and advocacy at the American Institute of Certified Public Accountants

Moreover, However, Trump's legislation also increased the income thresholds for certain information returns (this bears monitoring), in today's market environment

That could raise eligibility questions for tipped workers who don't get a form

However, there is also uncertainty whether workers fully disclose cash tips to their employer and the IRS. "The elephant in the room around this whole 'no tax on tips' vision is, so many tips go unreported to begin with," said Henry-Moreland