What does no tax on tips mean? “No tax on tips” refers to an above-the-line deduction for qualified tips. Above-the-line means it reduces your adjusted gross income (AGI) before you even choose between the standard deduction and itemizing. This means: You can claim the no tax on tips deduction regardless of whether you itemize or take the standard deduction. It applies whether tips are cash tips, debit card tips, or credit card tips — as long as they are reported correctly on your Form W-2, 1099
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