DWA Tax Firm

Can you write off an engagement ring?

“Tax-free tips” is kinda a myth. 🧠

What’s being talked about is a federal income tax deduction for qualified tips, not a rule that makes tips automatically untaxed. That means it can lower your taxable income, but you will still owe Social Security + Medicare (F**A) on those tips, and state income tax might still apply depending on where you live.

Also, it’s not unlimited — the deduction is capped at $25,000, so the savings depend on your tax bracket and your total income.

In the video, I walk you through a very simplified example of how no tax on tips works on your federal tax return.