No tax on Tips for Rental Income

General Landlording & Rental Properties
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No tax on Tips for Rental Income

John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes

So, when Trump changes to no tax on tips I feel inclined to change my rental income structure.

50% reduction in rent.

Previous 50% made up from a mandatory nontaxable tip.  This will be for my excellent service as a landlord.

Just like a restaurant does when you have a party of 8 or more - they add a mandatory tip.

Doubt there will be any laws against this, at least initially.

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Bruce WoodruffPro Member
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
1y
Quote from @Aaron Zimmerman:

I would look for other ways to legally reduce income such as cost segregation studies. Also - the no taxes on tips is not currently law. 


Yeah, I think you may be missing an attempt at humor here....but then you are an accountant..... :-)

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  • Greg ScottPro Member
    Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
    1y

    LOL  Very creative.

    It could produce a windfall, or perhaps, massive IRS penalties.   Will you roll the dice?

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  • John UnderwoodPro Member
    OP
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    1y
    Quote from @Greg Scott:

    LOL  Very creative.

    It could produce a windfall, or perhaps, massive IRS penalties.   Will you roll the dice?


    Probably not, but I'd see what my CPA and attorneys have to say.

    Be a pain having tenants pay you twice too.

    Also, passive income is already treated pretty favorably after deductions such as depreciation.

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  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    1y

    I admire your spirit and outside-the-box thinking my friend. I am on your side, call if you have any problems with this....

    1Reply
  • Aaron ZimmermanBusiness Member
    Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
    1y

    I would look for other ways to legally reduce income such as cost segregation studies. Also - the no taxes on tips is not currently law. 

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  • John UnderwoodPro Member
    OP
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    1y
    Quote from @Aaron Zimmerman:

    I would look for other ways to legally reduce income such as cost segregation studies. Also - the no taxes on tips is not currently law. 


     That's why I said once Trump initiates it. Then it could potentially be legal depending on how it's worded.

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  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    1y
    Quote from @Aaron Zimmerman:

    I would look for other ways to legally reduce income such as cost segregation studies. Also - the no taxes on tips is not currently law. 


    Yeah, I think you may be missing an attempt at humor here....but then you are an accountant..... :-)

    3Reply
  • John UnderwoodPro Member
    OP
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    1y

    LOL

    0Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    1y
    Quote from @John Underwood:

    LOL

    I'm certain they will add restrictions to prevent people from doing this. Imaging $1 Uber rides, then tipping the driver based on the actual distance. Or a $1 Ribeye steak at Albertsons, then you tip the cashier. Any business could do this with their services and the savings would certainly justify the additional effort.

    But if you take advantage of the new law, wouldn't the renter do the same? A tip is voluntary, so your tenant could agree up front, then refuse to pay. You'll end up in court with a lease agreement that says rent is $1, and the recommended tip is $1,999. The tenant will claim your service sucked and only tip you $200. Good luck winning that one in court.

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  • John UnderwoodPro Member
    OP
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    1y
    Quote from @Nathan Gesner:
    Quote from @John Underwood:

    LOL

    I'm certain they will add restrictions to prevent people from doing this. Imaging $1 Uber rides, then tipping the driver based on the actual distance. Or a $1 Ribeye steak at Albertsons, then you tip the cashier. Any business could do this with their services and the savings would certainly justify the additional effort.

    But if you take advantage of the new law, wouldn't the renter do the same? A tip is voluntary, so your tenant could agree up front, then refuse to pay. You'll end up in court with a lease agreement that says rent is $1, and the recommended tip is $1,999. The tenant will claim your service sucked and only tip you $200. Good luck winning that one in court.


     Good point.

    1Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    1y
    Quote from @John Underwood:
    Thanks. Care to tip me? ;)
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  • John UnderwoodPro Member
    OP
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    1y

    Here is your tip:

    Buy low and sell high, also don't eat the yellow snow.

    0Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    1y

    And now a Zappa reference too. Great post!

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