Tip Tax Termination Act

Tip Tax Termination Act 

This bill excludes from gross income, for income tax purposes, eligible tips not exceeding $20,000 in a taxable year. The bill defines eligible tips as amounts received by a taxpayer while performing services in a position that generally relies on tips as part of wages, including cosmetology, hospitality, and food service. This tax exclusion terminates with respect to tips received after 2028.   

[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7870 Introduced in House (IH)]

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118th CONGRESS
  2d Session
                                H. R. 7870

To amend the Internal Revenue Code of 1986 to provide that certain tips 
 shall not be subject to income or employment taxes for a period of 5 
                                 years.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 5, 2024

  Mr. Bacon introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to provide that certain tips 
 shall not be subject to income or employment taxes for a period of 5 
                                 years.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Tip Tax Termination Act''.

SEC. 2. EXCLUSION FROM GROSS INCOME OF CERTAIN TIPPED WAGES.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by inserting after section 
139I the following new section:

``SEC. 139J. CERTAIN TIPPED WAGES.

    ``(a) In General.--Gross income shall not include so much of the 
eligible tips received by an individual during the taxable year as does 
not exceed $20,000.
    ``(b) Eligible Tips.--For purposes of this section, the term 
`eligible tips' means amounts received while performing services which 
constitute employment in a position which generally relies on tips as 
part of wages, including cosmetology, hospitality, and food service.
    ``(c) Denial of Double Benefit.--
            ``(1) In general.--Except as provided in paragraph (2), any 
        amount which is excluded from gross income under this section 
        shall not be taken into account in determining any deduction or 
        credit under this chapter.
            ``(2) Exception for child tax credit; earned income 
        credit.--The amount excluded from gross income under this 
        section shall be taken into account for purposes of determining 
        the credits under sections 24 and 32.
    ``(d) Termination.--This section shall not apply to tips received 
after December 31, 2028.''.
    (b) Application to Employment Taxes.--
            (1) Social security taxes.--
                    (A) In general.--Section 3121(a)(12) of such Code 
                is amended by striking--
                    ``(A) tips'' and inserting ``Except as provided in 
                section 139J--
                    ``(A) tips''.
                    (B) Trust funds held harmless.--There are hereby 
                appropriated to the Federal Old-Age and Survivors 
                Insurance Trust Fund, the Federal Disability Insurance 
                Trust Fund, and the Federal Hospital Insurance Trust 
                Fund amounts equivalent to the reduction in revenues to 
                each such Trust Fund, respectively, by reason of the 
                amendment made by subparagraph (A) (determined without 
                regard to this subparagraph). Amounts appropriated by 
                the preceding sentence shall be transferred from the 
                general fund at such times and in such manner as to 
                replicate to the extent possible the transfers which 
                would have occurred to such Trust Fund had this section 
                not been enacted.
            (2) Unemployment taxes.--Section 3306(s) of such Code is 
        amended by striking ``For purposes of this chapter'' and 
        inserting ``Except as provided in section 139J, for purposes of 
        this chapter,''.
            (3) Wage withholding.--Section 3401(a)(16) of such Code is 
        amended by striking--
                    ``(A) tips'' and inserting ``Except as provided in 
                section 139J--
                    ``(A) tips''.
    (c) Clerical Amendment.--The table of sections for part III of 
subchapter B of chapter 1 of such Code is amended by inserting after 
the item relating to section 139I the following new item:

``Sec. 139J. Certain tipped wages.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to amounts received after December 31, 2023.
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