Former President Donald Trump made a significant promise during a rally in Las Vegas, Nevada, on Sunday – if elected president in November, his administration will eliminate taxes on tips. This announcement was met with excitement from the crowd, particularly from hotel workers and those who receive tips through their work.
During his speech, Trump told the audience that under his administration, people working in hotels, restaurants, or other jobs involving tipping would not be taxed on their tips. He stated, “So, this is the first time I’ve said this. And for those hotel workers and people that get tips, you’re going to be very happy, because when I get to office, we are going to not charge taxes on tips — people making tips.
Tips, as defined by the Internal Revenue Service (IRS), are “discretionary (optional or extra) payments determined by a customer that employees receive from customers.” These can be in the form of cash tips, tips left through a credit or debit card, or even “tip amounts received from other employees paid out through tip pools” or “tip splitting.
The IRS has clarified that all cash and non-cash tips an employee receives are considered income and subject to Federal income taxes. Furthermore, all cash tips received by an employee in any calendar month must be reported to the employer and are subject to social security and Medicare taxes. If the total amount of tips received by a single employee from a single employer is less than $20 in a month, however, these tips do not have to be reported and taxes are not required to be withheld.
Trump reiterated that his administration would not tax tips, stating, “We’re not going to do it,” adding that this policy change would be implemented “right away” upon taking office. He also emphasized that his administration would not “go after” the taxes of those who work in restaurants where they receive tips.
This promise by President Trump has been met with a mixed response, with some praising the potential benefits for workers in the hospitality industry while others question the feasibility and impact on the federal government’s revenue. Nevertheless, this proposal is likely to remain a topic of discussion as the election season unfolds.