Author Topic: Extremely high tips - tax genius or misguided extravagance?  (Read 2603 times)

livetogive

  • Stubble
  • **
  • Posts: 235
Extremely high tips - tax genius or misguided extravagance?
« on: December 04, 2013, 02:04:34 PM »
This is so counter to mustachianism (or is it?) that I thought it might be of interest to people here.  This is a semi-private person who leaves extravagantly high tips at restaurants as a form of charity.  Searched but didn't see this on the board yet.

http://instagram.com/tipsforjesus

http://blog.sfgate.com/stew/2013/12/04/mystery-tipper-hits-2-s-f-restaurants/#18580101=0

I was trying to figure out if there's a rational reason to do this assuming you plan on giving away your wealth.  The only one I could come up with is (and i'm not a tax accountant) that there's a limit to how much income you can deduct as charity, so you're giving from an LLC or similar to avoid taxes by calling these all expenses.  You therefore assume that the person to whom you're giving is in a lower tax bracket than yourself --> less gift money wasted by them paying the income tax instead of yourself.

clutchy

  • Bristles
  • ***
  • Posts: 339
Re: Extremely high tips - tax genius or misguided extravagance?
« Reply #1 on: December 04, 2013, 03:31:21 PM »
you can't deduct that as charity.  It's not a recognized 501c. 

If it's a business account "meals" are deductible @ 50%.


livetogive

  • Stubble
  • **
  • Posts: 235
Re: Extremely high tips - tax genius or misguided extravagance?
« Reply #2 on: December 05, 2013, 11:11:46 AM »
That's what I meant.  If you were to give the money to some charity then you'd have an income deduction limit.

If you pay them that as a tip you can expense the dinner but the server pays taxes on the income.  Your assumption is their income tax rate is way lower than yours.