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HF 268

A bill for an act exempting cash tips from the individual income tax, and including applicability provisions.

2025-2026 Regular Session Introduced by Ryan Weldon and 1 co-sponsor

Iowa bill exempts cash tips from state income tax to increase take-home pay for service workers while reducing state tax revenue.

Committee report approving bill, renumbered as HF 1030.
#incometaxes #internalrevenuecode #laborandemployment #money #taxexemptions
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WeVote Research Nonpartisan
Bill Summary · HF 268

Legislative bill overview

HF 268 (renumbered as HF 1030) proposes to exempt cash tips from Iowa's individual income tax. The bill passed committee unanimously (24-0) with amendments and has garnered broad bipartisan sponsorship, indicating support across the legislative chamber.

Why is this important

This policy directly affects service industry workers who receive cash tips, potentially increasing their take-home income by reducing their tax liability. The exemption could meaningfully impact wages for restaurant, hospitality, and service workers who rely on tips as a primary income source, while also affecting state tax revenue projections.

Potential points of contention

  • Revenue impact: Reducing taxable income from tips decreases state tax collection; the fiscal note would clarify how significant this loss is and whether it affects education or social services funding
  • Fairness and equity concerns: Some may argue that exempting tip income while taxing regular wages creates unequal treatment; others may counter that tips are already underreported and this simplifies compliance
  • Implementation challenges: Tracking cash tips versus credit card tips creates administrative complexity, and determining eligibility or preventing abuse requires clear definitions and enforcement mechanisms

Compiled from official sources — confirm details with the bill’s official record.

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