US Tax Free On Tips List - Page 1
Forum section: electronics / general

author: EEVblog
author_rank: Unknown
timestamp: September 04, 2025, 06:23:48 am
content: This will impact quite a few on the forum, so it's not the usual politics.The US treasury has released the official list of jobs that will have no tax on tips for the next 3 yearshttps://home.treasury.gov/system/files/136/Tipped-Occupations-Detailed-8-27-2025.pdfThis includes content creators, streamers, podcasters, electricans, plumbers, and a host of other jobs.Presumably this will also mean Patreon income which are effectively tips.So if you are in the US, ask your local electrician or plumber if they want to work for free, but you'll tip them really wellhttps://www.cnbc.com/2025/09/03/treasury-trump-no-tax-on-tips-jobs.html

author: ataradov
author_rank: Super Contributor
timestamp: September 04, 2025, 03:15:06 pm
content: I know it is probably a joke, but it is impossible to work just for large tips. They have rules around that stuff, although they may not have enough people to enforce them.Also, I'm not sure Patreon will qualify as tips, especially if you also make Patreon-exclusive content. This is no longer "here is some money because I like the job you do" and more "I have to pay of I want access to that specific content". And again, may be they will not care to enforce it. But it might also depend on how Patreon reports that to IRS, they have a lot of automation setup that verifies your tax returns, so they will just send you auto-generated mail asking for more money.

author: vad
author_rank: Frequent Contributor
timestamp: September 04, 2025, 03:36:03 pm
content: Quote from: EEVblog on September 04, 2025, 06:23:48 amThere is an annual deduction limit of $25K for tips. A local electrician cannot work for free for an entire year - $25K is below the poverty line.

author: UnijunctionTransistor
author_rank: Frequent Contributor
timestamp: September 04, 2025, 04:53:00 pm
content: It is yet another loophole in the loophole-filled US tax code.What a smart people would do, is to file 25K as tips, and the remaining income as the actual taxable income.I ignore what impact this will have on the Social Security wages calculation, but *my gut feeling* is that when people retire, they will be unpleasantly surprised at the gap.

author: ejeffrey
author_rank: Super Contributor
timestamp: September 04, 2025, 05:25:56 pm
content: QuoteMy understanding (which could be wrong) is that this is just an income tax deduction, it doesn't affect payroll taxes at all. So it wont' affect social security benefit calculations. Of course payroll taxes are often the majority of taxes paid by "traditionally" tipped workers, so a lot of people aren't going to see the benefit they might hope for either.QuoteYep. The law says that the tips have to be entirely voluntary and not an agreed upon payment for services. And you are right, they may not enforce it for now. But could change at any time, possibly selectively.

author: vad
author_rank: Frequent Contributor
timestamp: September 04, 2025, 05:56:29 pm
content: Quote from: UnijunctionTransistor on September 04, 2025, 04:53:00 pmAs I understand it, the No Tax on Tips deduction does not apply to Social Security or Medicare taxes, so workers will remain fully protected in that regard.

author: EEVblog
author_rank: Unknown
timestamp: September 05, 2025, 03:42:26 am
content: Quote from: ataradov on September 04, 2025, 03:15:06 pmMost creators have leaned that the vast majority of Patrons don't actually want nor watch exclusive content, so most have stopped doing it. At least in our industry.

author: westfw
author_rank: Super Contributor
timestamp: September 05, 2025, 08:52:09 pm
content: QuoteHah hah. You might end up spending more on a tax attorney than you saved on your taxes...

author: EEVblog
author_rank: Unknown
timestamp: September 05, 2025, 11:31:34 pm
content: Quote from: westfw on September 05, 2025, 08:52:09 pmHardly.Anyone smart already has an accountant and they can take care of this. I assume it's the same in the US, but here you can just apply for a tax ruling if you are unsure about something.The dumbest thing ever is to hire a tax attorney, unless you are knee deep in some complicated audit.For those who rely heavily on Patreon income you'd be mad not to pursue this and even restructure your Patreon perks if needed.

author: abeyer
author_rank: Frequent Contributor
timestamp: September 06, 2025, 07:25:24 am
content: Quote from: EEVblog on September 04, 2025, 06:23:48 amExcept "performing arts" (without yet defining what exactly that means) is excluded, even if the occupation is on that list... by SOC classification their "Digital Content Creator" seems to be lumped into that category, so quite possibly could get included in that and not be able to claim this.Quote from: EEVblog on September 05, 2025, 11:31:34 pmI think you assume wrong. To my knowledge it is extremely hard to get any kind of binding individual interpretations of tax requirements from the IRS beyond "read the tax code and published advice and follow it." They have a history of resolving ambiguity in new taxes after the fact and clawing back what they decide you should have paid in audits (along with interest and penalties.)

author: EEVblog
author_rank: Unknown
timestamp: September 08, 2025, 01:09:15 am
content: Quote from: abeyer on September 06, 2025, 07:25:24 amIn that case, how is an expensive tax attorney going to help you?Good luck going to court against Uncle Sam with the defense "my tax attorney guessed it was probably ok". You're still on the hook.

author: ataradov
author_rank: Super Contributor
timestamp: September 08, 2025, 01:16:44 am
content: Realistically, unless you are doing some massive amounts, the worst thing that can happen is that IRS will send you a letter asking for more money, and may be some trivial fee on top.You can try to play with it, but with all the platforms automatically reporting stuff, IRS has good enough idea of what you owe.

author: ejeffrey
author_rank: Super Contributor
timestamp: September 08, 2025, 01:49:47 am
content: Quote from: EEVblog on September 08, 2025, 01:09:15 am"Relied on advice of council" is a pretty good defense against criminal charges for tax fraud. It's not bulletproof but it's pretty good. You will still owe back taxes but you are much less likely to have extra penalties on top of that, or even jail time. If you personally read the tax code, come to an interpretation that is especially favorable for you, then you can neither claim ignorance nor can you say you knew there was a potential issue to you got advice from someone competent to make that determination.That said, attorneys will mostly help when you have something unusual. "Influencer with patreon" is pretty generic situation and one they I wouldn't be surprised to see some official guidance from assuming there is anyone left to write it. Baring more official guidance or case law, a lawyer isn't going to be able to do much more than read the list. It's more of if you give bonus content to patreon supporters and have different tiers a tax lawyer might be able to help figure out what kind of test the IRS would use to determine if that is money for services,.or even better if there is a way you can structure it so that you are more likely to avoid problems.Hiring a tax attorney doesn't have to be expensive. Prosecuting complex court cases is very expensive. Getting a couple of hirus of legal advice before you take tens of thousands of dollars a year in potentially questionable tax deductions is cheap.

author: EEVblog
author_rank: Unknown
timestamp: September 08, 2025, 04:30:36 am
content: Quote from: ejeffrey on September 08, 2025, 01:49:47 amBingo. So just tell your accountant that it looks like you can claim this. Any decent accountant will tell you if you are in the ballpark or not.QuoteThat's what I said, any US Patreon creator would be crazy to not (if needed) restructure their Patreon now, make it very clear this is a tip/donation mechanism and you get nothing else in return.Like I also said, only a very small fraction (like 5% is a high number) of Patrons actually care about the exclusive content and perks. This is why almost all the creators I know with Patreon have dropped perks. I think Fran is the only I know that still offers some perks to Patrons.QuoteMaybe, go for it if helps you sleep at night, or the US is grossly different to how it works in Australia. Here there is absolutely no way you are going to get criminally charged for tax fraud because you saw your exact profession is on an official list for X tax treatment, your accountant didn't raise an eyebrow, and you claimed said tax treatment. At worst they just adjust your tax and ask you to pay up.

author: westfw
author_rank: Super Contributor
timestamp: September 08, 2025, 05:02:51 am
content: QuoteYes, this is true. Even with interest, and penalties, and interest on penalties, the IRS is not a terrible group to owe money to. Been there, done that (to my advantage.) No big deal.QuoteWell, I had meant to imply that you could get audited, and would need an accountant or tax lawyer to defend you during the audit. But, as above, that seems unlikely.Unless you're loudly critical of the administration :-(

author: Analog Kid
author_rank: Super Contributor
timestamp: September 08, 2025, 05:18:46 am
content: Quote from: westfw on September 08, 2025, 05:02:51 amYes.Let me share two experiences I had with the IRS which show that it isn't the big, bad heartless bureaucracy it's made out to be.First encounter with them was when I owed some back taxes, something less than $1,000 but not peanuts.I couldn't pay the full amount, my ass being broke, so I started making small payments, I think about $25.After making a couple such payments, I got a notice from them saying "Your next payment of [$25] is due ______."They were smart enough to initiate a payment schedule based on my behavior.The second time was when my mother died and left me a bunch of money. I didn't really have a clue how to deal with the inheritance tax, didn't want to pay a tax attorney, so I called the IRS.They were quite helpful and actually ended up telling me how I could save a bunch of $$$, which I had no clue about.Now, both of these happened some time ago, so I don't know the current state of affairs after Musk took his meat cleaver to them. I'd guess they might not be quite as helpful nowadays.

author: Halcyon
author_rank: Unknown
timestamp: September 08, 2025, 10:25:57 am
content: Dumb question, but how will this change anything for most people? Correct me if I'm wrong, but those relying on/receiving tips probably aren't likely to declare them in the first place.It might encourage more people to declare them in their tax return, but then what? They all of a sudden are receiving little to no tips when the tax-free period ends?

author: ataradov
author_rank: Super Contributor
timestamp: September 08, 2025, 01:37:59 pm
content: Most tips are received electronically, so you don't have a say in declaring them. They just automatically go on separate line in the W-2 form.Obviously, if you get cash, you need to be really dumb to declare it. But I don't even remember when was the last time I handled cash.

author: abeyer
author_rank: Frequent Contributor
timestamp: September 08, 2025, 07:19:03 pm
content: Quote from: ataradov on September 08, 2025, 01:37:59 pmThat's complicated... I worked in a restaurant, including doing their payroll and tip reporting, when I was in grad school. That may be true in some cases, but for restaurants in particular at least, there's also some IRS monitoring at the business level for tip reporting, and there is strong pressure to limit under-reporting.It's certainly not true for every little mom and pop cafe, but for larger places and particularly corporate owned chains, the IRS will offer the business a bit of a get out of jail free card on restaurant-level audits of tip reporting in exchange for some extra data about cash/card percentages and some enforcement from the restaurant on employees around keeping the breakdown of payments and the breakdown of reported tips somewhat commensurate. It became a really weird dance of saying to staff "Our advice and the law says report all your tips all the time (but, psst, look over here, this is how much you actually have to report to avoid getting flagged for being out of compliance.)"

author: EEVblog
author_rank: Unknown
timestamp: September 09, 2025, 10:30:14 am
content: Quote from: Halcyon on September 08, 2025, 10:25:57 amTake creators on Patreon for example. Patreon automatically reports US creators income to the IRS, so you can't hide it. So this a big thing if it's now considered a tax free tip instead of income. They still have state taxes though which this won't apply to, so you could still get stung there.

author: Rick Law
author_rank: Super Contributor
timestamp: September 10, 2025, 02:17:19 am
content: US Congress and US Senate both have to pass the bill. As usual, they don't pass the exact same bill. During the "give and take" reconciliation process, the actual outcome did NOT make tips (etc.) "non-taxable" but instead made it a tax deduction.As many (even in the US) mixed up between these terms, let me define them first before I put down the link.Tax deduction: You add up your "normal" income and subtract the deductions off. (Normal as in salary, pension, interest... but not capital gains, that goes in another bucket).Tax credit: As if IRS owe you this amount. So if you have $10 credit and a $1 tax bill, IRS will send you back the $9.Non-taxable: As if it never happened (financially). This was what many hope would survive in the final version of the passed bill, but it didn't. It turned into "deductions".Per IRS, certaintipsare deductible - up to $25,000. Certainovertime payis deductible, up to $12,500.Social Security(government run retirement/disability plan you paid into) deduction up to $6,000 only if over 65 year old.Here is a link to IRS on the matter:https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors[/supI fear, as it often happens with tax rules, that there may be more fine prints with surprises. Matter will become clearer once the 1040 tax form and instruction are out.

author: EEVblog
author_rank: Unknown
timestamp: September 10, 2025, 02:42:59 am
content: Quote from: Rick Law on September 10, 2025, 02:17:19 amThat works out the same either way, it just means they can track it all.Example:Say a Youtuber earns $100,000 in normal ad income and $50,000 in streaming "tips".If there was truly "no tax on tips" then they still pay tax on the $100,000But if it's classed as deduction instead then they pay tax on $150,000 total income minus $50,000 as a deduction, once again paying tax on the same $100,000There might be some small thing with being classed as a different tax bracket or whatever if it's based on gross income, or maybe even some other state based implication based on gross income, but still, pretty close to the same benefit.

author: Rick Law
author_rank: Super Contributor
timestamp: September 11, 2025, 03:19:27 am
content: Quote from: EEVblog on September 10, 2025, 02:42:59 amHate to disagree with you. It doesn't work the same. There is a cap at $25K, so one could deduct only 25K of the $50K -- verse if tips are non-taxable, the whole 50K tips is not in the picture at all. This is the case for New Jersey with Social Security being non-taxable with NJ State tax. It doesn't get included as income at all for NJ State tax.There will be other differences depending on how IRS implement this new law.Your example (total income = $150,000) is a good one... Per the IRS publication I cited in my last reply, the $150,000 is also the total income cap for "tips" and "overtime" deductions.IRS: "Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers)."Life is not long enough for me to read the whole "big beautiful bill" and I am not a tax expert. In doing my own tax over the years, I know number for a box/row in the tax form can involve many steps and dependencies. So until IRS fully implement the bill and set the rules, I wont know how the cap work. My guess is, the capcould bea graduated scale decreasing as income increase.At $150K, you just reached the point of zero deduction. If it is a graduating scale as I suspect, the $25K limit will reduce as "modified adjusted gross income" increase. By $150K, the deduction limit probably reduced down to $0 or $1 by the time the total income reach $150K.

author: EEVblog
author_rank: Unknown
timestamp: September 12, 2025, 02:12:43 am
content: Quote from: Rick Law on September 11, 2025, 03:19:27 amOk, I forgot about the cap. Still, if it's under that cap, and apart from any state tax issues, there would be no difference. But the US is a state (and even city) based tax hell-hole. We don't have any of that in Australia.

author: Rick Law
author_rank: Super Contributor
timestamp: September 13, 2025, 05:36:12 pm
content: Quote from: EEVblog on September 12, 2025, 02:12:43 amre: ...But the US is a state (and even city) based tax hell-hole. We don't have any of that in Australia....Yeah, it is awful. In the USA, besides Fed income tax, State income, and (in some locale) City income tax; Then we have State sales tax, in some cities, city sales tax. From the county and town, we have property tax, municipal fees (such as sewage)... I think an oxygen tax is coming for anyone breathing...I better stop now... I rant too much...

author: abeyer
author_rank: Frequent Contributor
timestamp: September 13, 2025, 10:29:29 pm
content: Quote from: Rick Law on September 13, 2025, 05:36:12 pmAnd don't forget that many state and city ones are based on where you work in addition to where you live. If you're lucky enough to live on one side of a state border and commute across to the other side for work you could possibly incur 5 different income taxes. (though typically the state and city ones have some form of discount rule such that if you're paying into two, they are both reduced so that the total is no more than what the most expensive one would have been alone...but you still have to file all the paperwork to do that.)Quote from: Rick Law on September 13, 2025, 05:36:12 pmAnd of course many states allow the creation of tax authorities, which basically grant an organization the ability to levy taxes for a specific purpose that may not line up with other political boundaries. (common for things like transit or large scale utilities)

author: EEVblog
author_rank: Unknown
timestamp: September 14, 2025, 10:02:17 am
content: Quote from: Rick Law on September 13, 2025, 05:36:12 pmWe have local council "rates" that pay for all the local stuff like garbage collection, roads, parks, community facilities etc. Based on your property size and community density, usually around $500-$1000/qtrState land taxes do exist, but usually don't apply to the family home, or properties under a certain high threshold value.

author: Cyclotron
author_rank: Unknown
timestamp: September 14, 2025, 10:24:26 am
content: The only thing more convoluted than tax complications in the US, from state to state, is the alcohol laws.You can be in a "dry county" with no alcohol sales and drive 10 minutes across the county line and through a drive-through warehouse (Brew Through).In some states, the state government controls liquor sales and only state stores are allowed, but you can cross an imaginary line and buy a liter in a convenience store.I like the provision to not tax tips. It's not going to surprise me if one of the taxing authorities slaps a windfall tax on that, though. (I'm tax jaded)

author: vad
author_rank: Frequent Contributor
timestamp: September 14, 2025, 11:58:21 am
content: Quote from: EEVblog on September 12, 2025, 02:12:43 amThere would be an interesting side effect. In some states, claiming the federal no-tax-on-tips deal could actually make your state taxes go up. Few of states (primarily red states like Alabama, Louisiana, etc) let you deduct the federal income tax you paid when figuring out state taxable income.So if your federal bill goes down because tips aren’t taxed, the amount you can deduct on your state return also goes down. That means your state taxable income goes up a bit, which eats into the benefit of the “no tax on tips” rule.

author: westfw
author_rank: Super Contributor
timestamp: September 14, 2025, 10:13:48 pm
content: QuoteThe sales tax is essentially similar to VAT that is used in many other countries, just implemented on a state/local level instead of nationally.But you left out Social Security, Medicare (and if you're lucky: the "extra medicare tax"), mandatory medical insurance, and Disability Insurance. Plus gift/estate taxes.I never can trust the simplistic comparisons like "oh, country X has it better than the US because their tax rates are higher!", because it's next to impossible to tell whether they're comparing apples to apples...

author: Cyclotron
author_rank: Unknown
timestamp: September 14, 2025, 10:34:40 pm
content: Quote from: westfw on September 14, 2025, 10:13:48 pmIndeed, its almost as if the people in charge of taxing don't want us to have a simple way of understanding how much tax we pay, to whom, or for what.And I agree with your sentiment on trying to do any comparison country to country. It's hard enough or impossible to do it in the US from place to place.

author: EEVblog
author_rank: Unknown
timestamp: September 15, 2025, 12:17:53 am
content: Quote from: westfw on September 14, 2025, 10:13:48 pmAll I know is that Australia is a vastly simpler tax system than the US . And there isn't a single individual or company that moves states in Australia for tax reasons, that's just not a thing here.