Tax This!

July 9, 2025

Geez, no taxes on tips ey? That's a campaign promise from the all mighty and benevolent ruler and king that has come to pass with the Big Beautiful Bill. Yes, he has come to rescue the working class yet again! Maybe I should just go back into tending bar now that my paycheck would be tax free! Thank the maker! But wait, there's a catch...

So first off, your state taxes, local taxes (if you have them), state unemployment taxes, Social Security and Medicare all still come out. What we are focused on is the Federal tax. Now let's be honest, most people in this world do not rush to their 1040EZ at the end of the year and claim every cent they made, let alone a cash tip they have received. And if you do, well God bless you, you are one honest son-of-a-gun!

So here in the state of NJ, for example, a tipped employee gets paid $5.62 per hour from their generous boss. Their boss can than use a "tip credit" of up to 9.87 per hour...which is basically assuming that the server will make at least that much in tips to equal the state minimum wage of $15.49 per hour. Crazy system, I know, I lived it. That's what gets reported to Uncle Sam in the end. It's then up to the server to report any other wages they made. Now we know if a server averages a 20% tip on every table he or she is making much more than $15.49 per hour. But you see, Uncle Sam is happy with just assuming the minimum wage.

Knowing full well that most citizens tipped in cash are not going to report it, they are happy with what they get. It was signed into law as the TEFRA act in 1982 by non other than Ronny Reagan. When the powers that be realized that they were getting zero tax revenue from restaurant employees prior to the legislation, they put this little ditty into effect. It was later replaced by the BBA in 2015, but essentially still has the same goal to kind of get what you can out of this sector of the working class. I.e. tipped employees.

So, now that I've bored you to tits, here is where the reality of no tax on tips lies...you ain't saving jack shit people. So even if you work full time as a tipped employee, claiming minimum wage, have your normal taxes taken out and then take the standard deduction, you wouldn't have had to pay Federal taxes anyway! This part of the BBB is complete bullshit meant to make idiots happy. The only tipped employee seeing any benefit from this at all have to work full time at an extremely high end restaurant to see any benefit whatsoever. Even then, it's minimal at best. So, like most of the garbage in the BBB, it only benefits the upper crust...or the restaurant owner for that matter.

I hope voting with your wallet and making this pile of human excrement president again was worth it. Especially if this "campaign promise" was why you put him back into office. By the way, another part of the BBB probably just took away your healthcare, or made it unaffordable...because as a former tipped employee, I know you most likely don't have a healthcare plan through the Pub or restaurant you work at. So, good luck with that moron! Maybe next time vote your conscience and not your bank account. Or as my old Irish boss at the Pub would say, "Don't be pennywise and a pound foolish!"

Just make sure you report all that at the end of the year...remember, it was a tip...wink, wink!