IRS Confirms New Tax Break Applies to Santas and Celebrity Impersonators

Santa Claus is catching a break from the taxman.The Internal Revenue Service clarified, on Friday, that people who dress as Santa for parties, as well as other characters or celebrities, can deduct tips on their tax returns.A final rule posted in the federal register lists more than 70 occupations eligible for the new deduction this tax filing season. The final regulations expand the list of eligible occupations to include visual artists and floral designers in the personal services category and add gas pump attendants in the transportation and delivery category.The rule clarification comes just ahead of next week’s tax filing deadline.The tip deduction is one of several changes in last year’s Big Beautiful Bill Act. Other breaks eliminate federal income taxes on most overtime pay; add a deduction up to $10,000 for interest payments on new car loans for American-built vehicles; and provide a temporary $6,000 deduction for seniors who meet income requirements. Another big change for filers in high-tax states is an increase in the deduction for state and local taxes — to $40,000 from the previous $10,000.The IRS says it has already processed nearly 100 million returns this year. It says the average refund this year is $3,462 — up 11 percent over last year.“Tens of millions of Americans are getting their refunds direct deposited in their bank accounts and their returns processed promptly without error or delay,” the IRS chief executive officer, Frank J. Bisignano, said in a release.One reason for the increase in refunds is that the IRS did not adjust withholding tables after the law passed, so most workers continued to have higher withholdings from their paychecks than required.The Trump administration boasts that nearly half of all filers have claimed at least one of the law’s new tax breaks, including 20 million taxpayers who claimed the provision for tax-free overtime. Another 4.6 million have claimed the deduction on tips.While taxpayers may be temporary winners with the new tax laws, they could be holding the bag down the road. The changes in the tax code could raise the federal budget deficit by nearly 1 percent of GDP in the current fiscal year, a Wellington Management macro strategist, Juhi Dhawan, predicted.The non-partisan Tax Foundation predicts the new carveouts could raise the federal deficit by $3 trillion over the next decade when factoring in spending cuts and economic growth.

IRS Confirms New Tax Break Applies to Santas and Celebrity Impersonators

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