TIPS Act

This bill focuses on workers who earn tips. It would let you subtract the amount of tips you reported to your employer from your taxable income, as a tax deduction. If your adjusted gross income is over $112,500, you cannot claim this deduction.

Only certain tips would count. They must come from someone who isn’t related to you and doesn’t own the business where you work, and they must be earned in jobs that commonly get tips, like cosmetology, hospitality, food and drink service, parking attendants, or custodial work. The bill also says it aims to end the separate federal minimum wage for tipped workers.

• Who is affected: Workers in tipped jobs such as salons, restaurants and bars, hotels, parking, and custodial services.
• What changes: A new tax deduction equal to your reported tips (not available if your adjusted gross income is above $112,500); the bill also states a goal to end the separate tipped minimum wage.