So the government just passed an act making tips tax free. Act creates a federal income tax deduction of up to $25,000 annually for tips received by employees. This deduction applies to cash tips, including those given by cash, credit/debit card, or check, but only if the tips are reported to the employer for payroll tax withholding. Employees earning up to $160,000 per year in 2025 are eligible for this deduction. The bill does not provide a tax break for workers who do not customarily receive tips (e.g., cooks, dishwashers).
Will this change your tipping habits?
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