A huge boost’: Clayton business reacts to no tax on tips

CLAYTON, N.C. (WNCN) — There are plenty of elements within the Big Beautiful Bill Act that are controversial. But local small businesses are showing support for a part of the law they believe they will benefit from.

Within all the rolling out of the dough is the hope the other kind of dough keeps Luna Pizza Cafe’s business in Clayton firing up for a long time.

Richard Williams, who spent the previous portion of his life as a professor at East Carolina University, struck up a friendship with John Jefferson who worked at a local restaurant. Before they knew it, they were studying the science of pizza in Florence, Italy and now find themselves teaching a local congressman how to make what’s truly authentic.

“The universe was really pushing us in this direction,” Williams said. “I could give you story after story of these angels that just came into our lives out of nowhere.”

Launching their first location in 2018, Williams and Jefferson have expanded their business across North Carolina. With 50 employees, retention is vital. Both believe the new no tax on tips law will help them retain and recruit workers.

“A lot of times, they really like the job, but need to make more money,” Williams said. “They’ll go off and get a different sort of job. But now this is a tax-free income for them, it is an inducement for them to stay with what they really are enjoying. We really enjoy having them as part of our company.”

Republican congressman Brad Knott said no tax on tips will have a trickle-down effect across his district.

“When you give them a gift like no taxes on tips, when you give them no taxes on overtime, when you allow small businesses to expense equipment, that’s a huge boost,” he said. “It encourage the business owner, it encourages the employees and businesses, just like this one here, [to] have a renewed vigor.”

As for losing a portion of the federal revenue stream, Knott said, “Any tax revenue that we’re losing on tips, if we can transfer that to a more robust economy, it’s more than worth it. A growing economy covers a lot of ills and that’s the goal behind the bill.”

CBS 17 visited Luna Pizza Cafe about six hours before they opened for dinner. Soon would come the rush everyone gets when the doors open. But that will be a stress that fuels passion, not the stress from the IRS that servers and bartenders often feel.

“It really does find them in a bind that’s stressful at the end of the year when the tax time does come,” Jefferson said. “They a get a bill with thousands of dollars on it they’re not really prepared for. This not only eliminated stress for them, it helps keep the local economy stronger by having more money in their pockets that they can spend at other local businesses.”

No Tax on Tips IRS guidelines

The IRS will provide transition relief for tax year 2025 for taxpayers claiming the deduction and for employers and payors subject to the new reporting requirements.

New deduction: Effective for 2025 through 2028, employees and self-employed individuals may deduct qualified tips received in occupations that are listed by the IRS as customarily and regularly receiving tips on or before December 31, 2024, and that are reported on a Form W-2, Form 1099, or other specified statement furnished to the individual or reported directly by the individual on Form 4137.

• “Qualified tips” are voluntary cash or charged tips received from customers or through tip sharing.
• Maximum annual deduction is $25,000; for self-employed, deduction may not exceed individual’s net income (without regard to this deduction) from the trade or business in which the tips were earned.
• Deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).

Taxpayer eligibility: Deduction is available for both itemizing and non-itemizing taxpayers.

• Self-employed individuals in a Specified Service Trade or Business under section 199A are not eligible. Employees whose employer is in an SSTB also are not eligible.
• Taxpayers must include their Social Security Number on the return and file jointly if married, to claim the deduction.

Reporting: Employers and other payors must file information returns with the IRS (or SSA) and furnish statements to taxpayers showing certain cash tips received and the occupation of the tip recipient.

Guidance: By October 2, 2025, the IRS must publish a list of occupations that “customarily and regularly” received tips on or before December 31, 2024.

• The IRS will provide transition relief for tax year 2025 for taxpayers claiming the deduction and for employers and payors subject to the new reporting requirements.