DIY Money | Personal Finance, Budgeting, Debt, Savings, Investing Big Beautiful Series: Tips and Overtime
Jul 16, 2025
Logan and Allie dive into the new tax rules affecting tips and overtime. They share personal anecdotes linked to the One Big Beautiful Bill Act, shedding light on its tax implications. The duo clarifies the differences between tax deductions and credits, emphasizing how they can impact finances. They discuss complex tax deductions for overtime and tips, detailing potential savings. Listeners also learn about income limits and common misconceptions about tip-based income, while stressing the importance of accurate reporting in light of recent tax changes.
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Deductions vs. Credits Explained
- The new tax law does not eliminate taxes on tips or overtime but provides deductions.
- Deductions reduce taxable income, unlike credits which reduce taxes owed directly.
Difference Between Tax Deduction and Credit
- A tax deduction reduces taxable income before tax is calculated.
- A tax credit reduces tax due directly, often more beneficial than deductions.
Coupon vs. Gift Card Analogy
- A deduction is like a coupon lowering the taxable base, a credit acts like a gift card to pay taxes.
- Overtime and tips qualify for deductions, not tax elimination as some believe.