Is a virtual tip jar a gift or tip?

I have a personal website with a virtual "tip jar". Are these payments taxable tips or non-taxable gifts?

Visitors receive nothing in return for leaving me money, and the site is completely free with no paywalls or products sold.

I've always considered these gifts, but they've also been under the reportable amount prior to the recent lowering of the reporting requirements.

206

Expert Alumni

Mar 13, 2023 5:58:16 AM

I would be very cautious. I consider the "Tip Jar." is taxable.

The basic rule comes from Section 61-Gross Income Defined of the Internal Revenue Code. It states that “gross income” (which is used to determine income taxes) means “income from whatever source derived,” specifically including compensation for services. To the IRS those tips must be compensation for services and therefore taxable.

It sounds like whatever it is you've provided is a service and the gratuity is taxable.

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Is a virtual tip jar a gift or tip?