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Candidate Trump Offers a Glimpse of Potential Tax Strategy
In his June 9 Las Vegas rally, presumptive Republican presidential nominee Donald Trump announced his intent, if elected, to exempt tip income from “federal taxation.” Left undefined, though, is whether he’s referring to federal income tax or FICA tax (the 6.2% payroll tax assessed on all workers and employers). For a recap of Trump’s remarks, including a recording of his specific comments, take a look at this dailycaller.com article by Julianna Frieman.
While exempting tips from income tax is one thing, not assessing FICA tax on tip income is something entirely different, given the Social Security Handbook guidance that “Cash tips you receive in the course of employment by any one employer are wages if the tips total $20 or more in a calendar month.” For workers receiving most of their career income via gratuities, this exemption could have a significant impact on the average indexed monthly earnings (AIME) portion of their eventual benefit calculation.
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