Canadians Reach Tipping Point with Tips; 94% Feel Tipping Has Gotten Out-of-Hand; 90% Feel Gratuities Are Too High and Consider 9% As the Appropriate Average Gratuity

H&R Block Canada Survey Reveals Canadians' Perspective on Tipping Culture and Highlights Ways to Optimize Tax Benefits for Tip Income

CALGARY, AB, March 11, 2025 /CNW/ - While 30% of Canadians say they support a strong tip culture, recognizing it's a key part of income for service industry workers in Canada, the vast majority appear to have extreme tip fatigue - both with expectations around gratuity amounts and with the extent of services that now prompt for a gratuity. This is despite nearly one in three Canadians (31%) that have directly worked in a gratuity-based job as some point. H&R Block's survey also reveals that while most Canadians know that tips are considered taxable income, 47% assume people are not actually declaring them on their taxes.

"It's important to emphasize that tips are considered taxable income, by law, even if your employer does not include any tip amount on your T4 slip. But the good news is there are many ways to make your tips work in your favour when it comes to filing your taxes," said Yannick Lemay, Tax Expert at H&R Block Canada. "Not only are there numerous deductions, benefits and credits you can leverage, there are tax-friendly ways to use your tips to invest in your professional growth and well-being and bolster your savings."

Canadians begrudge gratuity prompts from card payments machine: A colossal 94% of Canadians say they're annoyed by card payment machines prompting tip options for services that tips or gratuities weren't previously expected. However, more than half (57%) of Canadians feel awkward skipping the tap prompt so tend to leave a tip anyway.

While most Canadians know that tips are considered taxable income – many assume they're not declared for tax filing purposes: Overall, 84% of Canadians recognize that tips must be declared for tax purposes (whether they are cash, credit or via other payment methods). However, 47% assume that the recipients aren't declaring their tips when filing their taxes. Conversely, 16% didn't realize that tips must be declared as taxable income. Nearly half of Canadians (45%) say they try to give cash where possible, in thinking that the person then doesn't have to worry about paying tax on it.

Canadians are divided on whether they believe the individual or the employer pockets gratuities: While around half of Canadians believe the individual person they're tipping receives the money, the other half believe it goes into the employer's pocket.

More than half of Canadians identify as 'frugal tippers': Overall, 53% of Canadians consider themselves as frugal tippers, typically opting for the lower tip option and/or only tipping for exceptional service. This compares to 39% who say they're generous tippers and tend to opt for the higher tip amount or tip most services.

Many Canadians feel that tipping lets employers off the hook to pay employees' full wage: Overall, 88% feel that tipping culture has become a means for employers to pay their staff less. Furthermore, 91% believe that Canada should have less of a tipping and gratuity culture as employers should cover their employees' full wages.

Canadians believe 9% is the tipping sweet spot: When asked what Canadians believe the tipping or gratuity amount should be for various services, the overall average equated to 9%, which is well below typical gratuity prompt amounts. However, not all services are perceived as equal when it comes to the average amount considered appropriate by industry:  

• Restaurant servers:           13 %
• Bartenders:                        10 %
• Hair stylists and barbers:   10 %
• Food delivery drivers:          9 %
• Taxi or rideshare drivers:     8 %
• Spa and salon technicians:  8 %
• Hotel housekeeping staff:    7 %
• Valet parking attendants:     7 %
• Tour guides:                         7 %

H&R Block points to tax-smart ways to leverage your tips and gratuities income to reduce your taxable income and invest in future.  

1. Know What You're Entitled To: With hundreds of tax benefits and credits, it's important to understand what you're entitled to, to minimize taxable income and maximize your refund.  
2. Track Your Expenses: If your job requires you to pay for work-related expenses such as a uniform, work shoes, tech devices, tools, or paying for transportation, you may be able to deduct these. Make sure you keep all receipts and records of these expenses.
3. Contribute to RRSPs (Registered Retirement Savings Plan): For Canadians who earn a lot in tips, consider putting some of your tip income in an RRSP to reduce your tax bracket. The more you contribute, the less taxable income you have and the more you save.
4. Contribute to a TFSA (Tax-Free Savings Account): While contributing to a TFSA doesn't reduce taxable income, investment growth and withdrawals are tax-free. This provides a great way to invest any income from tips for your future financial well-being.  
5. Voluntarily Contribute to CPP (Canada Pension Plan): Direct tips (cash tips paid directly to workers) are not subject to CPP deductions, but you can choose to contribute voluntarily. This increases your future CPP benefits while reducing your taxable income.
6. Reduce Taxable Income Through Work Benefits: If your employer offers health or dental benefits, think about investing your tips into these benefits to make use of them while helping reduce your taxable income.  
7. Take Advantage of Basic Personal Tax Credits: The Basic Personal Amount (BPA) allows Canadians to earn a certain amount tax-free. In 2024, the BPA was $15,705.00, meaning only income above this amount is taxed. If your total income (including tips) is below this threshold, you may pay little to no income tax. It's still important to file a tax return to ensure you get access to the credits and benefits you're entitled to.
8. Training, professional or union fees: Professional associations and union fees are tax deductible for Canadian workers. Therefore, there's an opportunity to utilize your tip earnings to cover these fees, benefiting from membership or training while reducing the tax you pay.

"While all tips and gratuities are taxable in Canada, employees can reduce their tax burden by tracking expenses, contributing to RRSPs and TFSAs, claiming work-related deductions, and making use of CPP contributions and tax credits," said Lemay. "Consulting a tax professional can also help maximize deductions and minimize tax liability while staying compliant with CRA regulations."

About the survey
These findings are from a survey conducted by H&R Block from February 12-13, 2025, among a representative sample of 1,790 Canadians. The survey was conducted in English and French. For comparison purposes only, a probability sample of this size would carry a margin of error of +/-2.53 percentage points, 19 times out of 20.

About H&R Block Canada
A trusted partner of Canadians for over 60 years, H&R Block Canada is Canada's tax leader. Serving almost 1,000 locations across Canada, H&R Block's team of Tax Experts use the latest in technological advances combined with real-world expertise to help people file taxes in office, through drop off service, upload their documents remotely, or use do-it-yourself Tax Software. H&R Block Canada can support in the preparation of personal, small business, corporate, U.S., rental, and estate taxes. H&R Block's comprehensive education program, Tax Academy, trains new experts and ensures our Tax Experts continually update their skills. Learn more at www.hrblock.ca or 1-800-HRBLOCK.

SOURCE H&R Block Canada Inc.

For more information, contact: Katie Duffy, H&R Block c/o Ketchum, [email protected], 647-772-0969