Tip Tax Termination Act
This bill excludes from gross income for federal tax purposes up to $20,000 of eligible tips received during the tax year. The bill also requires the Internal Revenue Service to modify the tables and procedures used to withhold federal income tax from wages to take into account eligible tips excluded from gross income.
The bill defines eligible tips as amounts received while performing services in a position that generally relies on tips as part of wages, including cosmetology, hospitality, and food service.
Further, under the bill, the amount of eligible tips excluded from gross income must not be included in determining federal tax deductions or credits, except for purposes of calculating the child tax credit and earned income tax credit.
Finally, the exclusion from gross income only applies to eligible tips received before 2030.
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 558 Introduced in House (IH)]
<DOC>
119th CONGRESS
1st Session
H. R. 558
To amend the Internal Revenue Code of 1986 to provide that certain tips
shall not be subject to income taxes for a period of 5 years.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
January 20, 2025
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 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, 2029.''.
(b) Withholding.--The Secretary of the Treasury (or the Secretary's
delegate) shall modify the tables and procedures prescribed under
section 3402(a) of the Internal Revenue Code of 1986 to take into
account amounts excludible from gross income under section 139J of such
Code (as added by this Act).
(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, 2024.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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