Tipflation and our updated 2025 holiday tipping guide

Winston Churchill:  We make a living by what we get, but we make a life by what we give

Tipflation

Have we overdone it?  Do you think that tipping became overdone in the Pandemic?  Many today are tired of “tipflation” and believe tipping has taken over every service, including fast food, coffee shops, even retail and even medial offices. 

The tipping culture in the US originates in part from employers being allowed to pay low wages leaving some workers to rely on tips to be able to pay their bills.  In the 1960s, Congress allowed employers a “credit” for tips so they could pay workers less than the minimum wage under the theory that the workers received additional compensation from customer tips.  This is especially true for restaurants, where workers rely on tips to survive.   

But the theory does not necessarily apply to other workers.  And where tips apply, what you give should reflect the quality of service provided; it should not be obligatory. 

You may believe employers should pay more, but sometimes you are the one in that role, paying workers who rely on the tips.  Other times, you may find a service charge already added so be careful not to also give a tip. 

Update for holiday tipping

With this background on tipping in our country, we now turn to tipping for the holidays: This remains a time to say that special “thank you” to those who help get us and our families through each day, often throughout the whole year.  These tips should be “from the heart,” as a symbol of gratitude, rather than being expected. 

When you tip, please be mindful that the message you intend may not always be obvious. Your giving should show appreciation and respect.  Sometimes a smile, a kind word or even a note can really make someone’s day and have more lasting meaning than a Starbucks gift card.  Also be aware of any local customs to avoid anything uncomfortable.  This is especially if you are outside the US. 

Planning, budget and approach

Before you start giving anything, set a budget and make a list so you cover everyone fairly without overextending yourself.  Some use an “up to” method for guidance, as in “up to one session,” or “up to a week’s salary,” etc.

Like the holidays, this should be fun rather than stressful.  If you are sincere in expressing gratitude, people appreciate that you are doing what you can and often respond with the same cheer you demonstrated. 

For those you can’t tip, you can still make them feel appreciated

If you had to call emergency services or had a great experience with someone else who is not allowed to receive a holiday tip, you can send letters of thanks directly to a local hospital, fire station or police department.  You may be able to send a meal or buy coffee.  Check for any online bulletin board in your town, both to post a thank you note and to see if there are other ways to acknowledge your those you appreciate. 

“Neither snow nor rain…” – the delivery people

Despite the weather, terrain or traffic, your mail carriers, FedEx, UPS and Amazon drivers deliver your mail and packages every day and ensure that your online purchases arrive on time and in good condition.  

As you decide what and how much to give, check each particular company’s gift giving restrictions:

1.  Mail carriers – are prohibited from receiving any cash gifts and can get gifts valued no more than $20.  Unfortunately, the limit has not increased for inflation.

2.  FedEx – employees are prohibited from accepting gifts, but a wave, a smile or a note would be nice.

3.  UPS – workers are allowed to accept tips, but UPS discourages the practice.

4.  Newspaper delivery – if you still get the news in print, a gift of $15-$35 is standard.

5.  Amazon driver – we suggest the same as for newspaper delivery. 

6.  Food delivery and curbside pickup – again we suggest the same as for newspaper delivery.

Caregivers for kids, parents and pets

Caregivers for your children, parents and pets can be lifesavers as they provide care, education, exercise, and attention to those you care about most.  This is the time of year to let them know that you are thankful for all that they do.  The amount of service they provide and the arrangement you have with them can dictate the appropriate gift level:

1.  Nanny/au pair – a week’s salary and a small gift.

2.  Daycare teachers – a $25-$75 gift.

3.  Home healthcare worker – from one week up to a month’s salary.  If tips are not permitted, consider cooking or baking something special.  If the care is in a senior living or hospital setting, be sure to cover the whole shift. 

4.  Teacher – a small gift and a handmade card from your child.  Note that a cash gift could be misconstrued as a bribe.  You can pool resources with other parents for a gift card. 

5.  Dog walker – depending on your walker’s schedule, you may want to give a day’s pay up to a full week’s pay.

6.  Dog groomer – from half up to the full cost for a single service.

If you contract any of these services through an agency, you may want to contact the agency to find out if they have a gift-giving policy in effect.  If the agency prohibits gifts, consider alternatives like making a donation to the agency or sending in homemade cookies to the office, or sneak a Starbucks card into their stockings. 

Home Maintenance

Whether you live in a single-family home or a large apartment building, it’s likely there is someone who services your home or property in some way. 

1.  Trash and recycling collectors – a gift of $25-$35, which you may want to mail directly to the collection company if you can’t safely leave for the collectors.

2.  Door attendant – a gift of $25-$100, depending on their role during the year.

3.  Regular cleaning person – up to the cost of one visit.

4.  Landscapers/gardeners – a gift of $25-$50 per person or if you have just one person doing the work, up to the cost of one visit.

5.  Parking garage attendant – a gift of $25-$50.

6.  Building’s handyman, superintendent and custodian – a gift of $25-$100.

If you have someone who always goes the extra mile, such as a handyman who’s prompt and efficient or a door attendant who is quick to carry heavy packages for you, then a larger tip may be warranted. 

Personal Services

It’s hard work keeping you fit, perfectly coiffed and beautiful, and ready to face the day.  Now is a good time to show appreciation for those efforts, especially when they help you get that special appointment when you really need it.  In deciding whether to tip and how much, consider this:

1.  Hairdresser/manicurist – if you’re a frequent visitor, tip up to the cost of one visit.  If you’re a less frequent customer, then $20.  However, if you tip generously through the year, you do not need to give an extra tip at the end of the year.  If multiple people work on your hair, divide the tip among them.  And if any of them double as your therapist, add a bit more!

2.  Personal trainer – up to the cost of one visit.

3.  Massage therapist – also up to cost of one visit.

4.  Golf or tennis instructor or sax teacher – up to one lesson or a thoughtful gift.

Good feedback is appreciated by their supervisor as well as by the people who are helping you out. 

If you’re unable to tip or give a gift, a thoughtful thank you note will acknowledge the good work these people do for you throughout the year.   

Send a thank you note to the supervisors of the people who provide you with great service throughout the year, letting them know how impressed you are with the service their people provide.

Enjoy the season!

  • Steven

Mid-Year planning – Rates, Roths and Rules

Checking your income tax planning now is a good idea – tax planning can be done year-round.  As with any planning, acting while you can have an impact is best.  Tax laws may change before the end of 2022, e.g. Secure Act 2.0 may be adopted, but it’s still wise to know where you stand now. 

The IRS seems to have a similar thought about tax planning as they created a website with tools and resources at Steps to Take Now to Get a Jump on Your Taxes – if you check it out, let us know what you think.

First question:  did you get a tax refund, or did you owe? 

Refunds

Some people enjoy seeing a big refund, but as you may have heard, you are giving the government an interest-free loan with your money.  If you want to save, there are better ways, like an auto-debit to an IRA or to a savings account.

Not sure what happened to your refund?  There is a updated IRS tool for “where’s my refund” that now goes back three years at “Where’s My Refund?” 

The tool confirms receipt of your tax return, shows if the refund has been approved and indicates when it will be or has been sent.  If three weeks pass without receiving the refund, then you may want to contact the IRS.

Owed taxes

If you owed a significant amount for 2021, the IRS has another tool that helps make sure you have enough withheld for 2022 at Tax Withholding Estimator.  This way you can avoid penalties and interest for under withholding. 

If you do not get clear answers using the estimator tool, try comparing your 2022 paystub to your 2021 tax return, review the IRS guidance at Publication 505, or contact us for help.  

Second question: what happens if you act now?

Marginal vs. average tax rate

Knowing the rate at which additional net income will be taxed helps you make decisions such as the one in the next section, whether to convert an IRA to a Roth IRA or not. 

The marginal rate is your tax bracket, the rate at which the last portion of your income is taxed.  Any additional income would be taxed at this rate.  Your average tax rate is the percentage of income taxes to total taxable income.  You can have a low average rate but hit a high marginal rate, which may mean that taking more income into the current year would be costly. 

Time to convert to a Roth IRA?

The decision to convert a traditional IRA to a Roth IRA depends on several factors.  One is the rate of tax you pay now compared to the rate you expect to pay in retirement.  If your rate will be the same at retirement as now, then there are many reasons to convert, such as no required minimum distributions at retirement for a Roth IRA.  If your tax rate at retirement will be significantly less than currently, then converting now would be less tax efficient. 

If you want more on this decision, see “To Roth or not to Roth?” or check out Pros and Cons here.

Also, we discussed the back-door Roth IRA in our year-end post on 2021 tax planning.  

Last question:  how with this affect the rest of your finance?

Coordinate with investing and estate planning

Make sure any changes take for tax reasons do not foul your investment or estate planning. For more on estate planning, see estate planning checkup post

Summary

As you review your 2022 tax planning, check your 2021 returns for ideas on what to adjust, consider the impact of future tax rate increases and act when the impact on other planning also makes sense. 

Let us know if you have any questions. 

Good luck

Holiday gift and tipping guide Pandemic style

The holidays are a great time to say “thanks” and show appreciation for those who help us keep our families, homes and businesses on track, keep our homes clean, help us stay fit, and help us in other ways to get through each day throughout the year.  With that in mind, we encourage you to show your appreciation.

Gift giving etiquette may not always be obvious when considering gifts for people outside of your friends and family, so be mindful of the message you send.  Giving should show appreciation and respect.  Sometimes a smile or kind word can really make someone’s day.

Holiday Planning Series with the Squash Brothers, part III, debt management

Watch our Holiday Planning Series, Part II, as Steven and the Squash Brothers discuss debt management so you do not overspend and end up with credit card debt you can’t pay off.

Thanks for watching our series!

Holiday Planning Series with the Squash Brothers, part II, cash management

Watch our Holiday Planning Series, Part II, as Steven and the Squash Brothers discuss cash flow planning so you have more to spend (or to save!).

Next time, debt management.