President Trump is headed to Arizona and Nevada this week where he is expected to tout his “No Tax on Tips” measure signed into law last summer.
Less than 3% of all workers have tipped jobs, but that percentage is higher in areas that rely on service and tourism.
Todd Cox is a certified public accountant in Las Vegas, which has triple the national average of tipped workers, according to the non-partisan Tax Policy Center. He said some of his clients are seeing savings.
“People have been significantly and pleasantly surprised with the effect that it’s had on their tax returns,” Cox said “These are people who usually pay that are now getting $2,000 to $3,000 refunds.”
The new law has a cap of $25,000, meaning tipped workers can only deduct up to that amount from their income tax. Previously gig workers and tipped workers did not have these deductions.
There is also a “No Tax on Overtime” provision. Essentially, overtime deductions are limited to a third of the earnings. Like most tax rules, there are parameters and complicated factors.
For example, Cox explained, if a worker earns $20 an hour and gets paid $30 an hour for overtime, only a portion of that $10 difference can be deducted.
“So if you take that $30, you divide it by 3, it gives you that $10,” Cox explained. “That is the .5 extra you’re getting paid for working an overtime hour vs. working a standard hour,” explained Cox.
Davey Zelesky is a bartender in Las Vegas with two jobs. All these complicating factors and exemptions place a significant burden on workers when it comes to doing taxes.
Zelesky and workers like him are already straining to make ends meet financially, and the time it takes to gather the documentation needed simply adds to an already burdensome workload.
He said it also puts him in a “damned if I do, damned if I don’t” position. While Zelesky said he was diligent and filed appropriately, there are still pitfalls. He said if workers make enough in tips, they could be pushed into a higher-earning tax category.
“I don’t need the tax credits as much as I need the money to buy groceries,” Zelesky said.
He said it would be more beneficial if the “No Tax on Tips” was literally that – no taxes on tips without exemptions and limitations. What is needed is a real way to “alleviate the tax burden on working families,” he said.
Wednesday, the White House issued a news release touting the “Working Families Tax Cuts Act.” It says this year, there are “bigger refunds,” and referenced savings through “No Tax on Tips,” “No Tax on Overtime,” “No Tax on Social Security,” among others.
The Nevada Democratic party along with the Culinary Union plan an online news conference to discuss the lack of affordability with the rising costs of utilities, groceries and gas prices.
Local advocacy groups plan a protest during President Trump’s speech Thursday.
This story was produced by the Mountain West News Bureau, a collaboration between Wyoming Public Media, Nevada Public Radio, Boise State Public Radio in Idaho, KUNR in Nevada, KUNC in Northern Colorado, KANW in New Mexico, Colorado Public Radio, KJZZ in Arizona and NPR, with additional support from affiliate newsrooms across the region. Funding for the Mountain West News Bureau is provided in part by the Corporation for Public Broadcasting and Eric and Wendy Schmidt.
