Yes. That means tips. The Early Show personal financial adviser Ray Martin has information that might help you.
Most people will give holiday tips to people who provide services such as child care, housecleaning and newspaper delivery. According to a recent Consumer Reports Survey, only 42 percent surveyed say they will refrain from giving any holiday gifts or tips to commonly used service providers. With holiday spending forecasted to be up by 6 percent, the bet is that most people will also increase their holiday tipping.
So if you do plan to give tips, you'll want to do so tactfully.
Plus, what are you saying when you slip your child's teacher $25? It may look like a bribe for better grades for your child. In such cases, a gift card for classroom supplies or for use at a bookstore may be more appropriate. Also, keep in mind that postal employees and other civil servants are not allowed to accept cash or anything worth more than $20.
Think your budget doesn't have room for tipping? According to the National Retail Federation, holiday shoppers plan to spend at least $90 on themselves. Cutting back here can help allow for making some well-deserved tips.
Holiday tipping etiquette updated for 2005 by the Emily Post Institute:
- Baby sitter: a night's pay and a gift
- Day-care provider: $25 to $70 and a gift
- Au pair/nanny: a week's pay and a small gift from the children
- Housecleaner: a day's pay
- Building staff: $20 to $100
- Trash collector: $10 to $30
- Paper deliverer: $10 to $30
- Hairdresser: $10 to $60, or price of one treatment
- Fitness trainer: cost of one session
Remember: generally, tips are not tax deductible. However, there is a possible exception. Donating school supplies may qualify as a charitable deduction.
You can only deduct the amount/value of your contribution if it's more than the value of the benefit that you or your dependents receive. In other words, if you give supplies that will benefit your child, you can only deduct the value of the supplies that do not benefit your child.
Another possible tax-deductible charitable donation can be given to the neighborhood police or fire department by donating to their widows' and orphans' fund.
If you receive tips, keep a daily tip record. Do not report service charges that your employer adds to the bill. These are W-2 wages. You should report tips you receive to your employer. Your employer can then withhold taxes and report the proper amount to Social Security, which affects the benefits you will receive when you retire.
You may be exempt from reporting tips if it's not customary to tip for the service you provide. The IRS may be willing to concede that additional payments received for normal services may not be tips and may be tax-free gifts from the customer.