Sponsors (4)
The bill provides targeted federal tax relief for state/local utility taxes and surcharges to taxpayers who itemize (especially in high-utility-tax states), at the cost of reduced federal revenue and uneven benefits that largely exclude standard-deduction filers and many renters.
Taxpayers who pay gas or electric bills can deduct state or local taxes and mandated surcharges on those bills, reducing their taxable income and lowering federal income tax owed.
Households in states with relatively high utility taxes or surcharges receive proportionally larger tax savings, improving after-tax household budgets in those states.
Many low- and middle-income taxpayers who take the standard deduction will not benefit because the deduction applies only to taxpayers who itemize, so the policy is regressive in reach.
The deduction reduces federal tax revenue, which could increase deficits or create pressure to cut or underfund public programs paid from general revenues.
Households that do not pay utilities directly (for example renters whose utilities are included in rent) or who live in arrangements where utilities are not separately billed will get less or no benefit, favoring homeowners or directly-billed households.
Based on analysis of 2 sections of legislative text.
Allows a federal deduction for taxes and state-mandated surcharges listed on a taxpayer's gas or electric utility bills.
Official title: To amend the Internal Revenue Code of 1986 to allow the deduction of taxes and State-mandated surcharges included on gas or electric utility bills.
Introduced April 16, 2026 by Josh Riley · Last progress April 16, 2026
Allows taxpayers to deduct taxes and state-mandated surcharges that appear as line items on residential gas and electric utility bills from their federal income taxes. The change adds a specific deduction to the Internal Revenue Code for utility-bill taxes and takes effect for taxable years beginning after enactment.