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Tips Are (Mostly) Tax-Free Now — No, This Isn’t a TikTok Prank

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What Changed?

The new “No Tax on Tips” Act means most service-industry tips are federally tax-exempt starting in 2025. Servers, bartenders, stylists—this one’s for you.

The Catch

  • Exempt: Cash tips, Venmo/Zelle tips, that $20 bill folded discreetly in your apron.
  • Not exempt: Service charges (“mandatory gratuity”), banquet fees, or your boss “pooling” tips into wages.
  • Employers still must report tips, but correctly marked as exempt.

NJ Twist

New Jersey hasn’t decided if it will play along. So while the IRS may give you a pass, NJ might still want a slice of your tips. Translation: feds say “party,” Trenton says “not so fast.”

Example

Kevin in Hoboken earns $12,000 in tips. Federal tax = $0. NJ tax? Still pending. Cue the suspense music.

Disclaimer: This blog is for educational purposes only and should not be considered legal or tax advice.
Need help? Email info@taxzingerpro.com or dial 1-800-511-3928.

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