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The Internal Revenue Service Releases More "No Tax on Tips" Guidance for Tipped Income and (some) Overtime Pay.
The Internal Revenue service on Monday released their updated guidance for bartenders, servers, and other traditionally tipped occupations on the new tax bills exemption from Federal income tax* on up to $25,000 a year of the tips you receive.
The most recent guidance is available from the IRS.Gov web site.
The Internal Revenue Service has also provided a list of examples on how the new tipped income and overtime income should be calculated.
If you really want to learn more about how "No Tax on Tips" is expected to work this Wall Street Journal article (unlocked) reviews the basic eligibility and big issue.
"The full $25,000 income-tax deduction for tip income starts phasing out once income reaches $150,000 for individuals and $300,000 for married couples. The $25,000 maximum applies to individuals and married couples.
The overtime-pay deduction is capped at $12,500 for individuals and $25,000 for married couples. The break starts shrinking once income reaches $150,000 for individuals and $300,000 for married couples.
The retroactive tax cut will get money to workers faster, but it also poses unusual administrative challenges for the government, employers and employees."
Good luck and congratulations on a likely larger refund as you file your 2025 tax returns this winter.
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