Who qualifies for the no tax on tips deduction?

Per IRS guidance, qualified tip income up to US$25,000 may be deductible during 2025–2028, subject to Modified AGI phaseouts and proper documentation. Claiming is expected via Schedule 1-A. Workers must substantiate reported tips. Final eligibility depends on IRS instructions and employer reporting matching individual filings.

How could this affect Australian portfolios?

If US refunds are larger in 2026, discretionary spending can rise. ASX names with US exposure in travel, apparel, and electronics could see demand support. Monitor retailer guidance, card‑spend data, and inventory trends. A neutral ^GSPC technical setup means sentiment shifts may track verified adoption rather than momentum.

What is Schedule 1-A in this context?

Schedule 1-A is the expected IRS form section used to claim the no tax on tips deduction and the no tax on overtime write‑off. Final instructions will detail documentation, MAGI phaseouts, and caps. Filers should retain payroll and tip records to support claims during the 2026 filing season for 2025 income.

What risks could limit the impact?

MAGI-based phaseouts can reduce eligibility. 2025 transition‑year reporting gaps and employer compliance work may delay or reduce claims. Documentation for cash tips is critical. The net boost to spending depends on uptake rates, refund timing, and how retailers respond with pricing and promotions across the 2026 season.

Law and Government

^GSPC Today: February 20 — New US Tip/OT Deductions May Lift Spending

ByHuzaifa Zahoor February 20, 2026February 20, 2026

The new US no tax on tips deduction and the related no tax on overtime rule could modestly lift American take‑home pay and 2026 refunds. For Australian investors, stronger US discretionary demand can filter into ASX consumer, travel, and tech revenues. The guidance spans 2025–2028 with caps for qualified tips (up to $25,000) and overtime (up to $12,500/$25,000). Uptake may face MAGI phaseouts and 2025 transition‑year reporting gaps. We outline mechanics, risks, and what ^GSPC signals might mean for local portfolios.