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Bill

HF 361

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

2025-2026 Regular Session Introduced by Jeff Cooling

Bill HF 361 exempts cash tips from state income tax, easing the tax burden on service workers like waitstaff and bartenders starting in 2026.

Introduced, referred to Ways and Means.
#incometaxes #salariesandwages #taxexemptions
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WeVote Research Nonpartisan
Bill Summary · HF 361

Summary of Bill HF 361

Purpose and Intent

Bill HF 361 aims to exempt cash tips from individual income tax in the state. The primary intent is to alleviate the tax burden on individuals who receive cash tips, particularly those in service industries where tipping is common, such as restaurants and hospitality.

Key Provisions

  • Amendment to Tax Code: The bill proposes an amendment to Section 422.7 of the Code 2025, adding a new subsection (45) that allows individuals to subtract cash tips from their taxable income.
  • Inclusion Criteria: The cash tips must be reported on statements provided to employers, as mandated by Section 6053(a) of the Internal Revenue Code.
  • Effective Date: The provisions of this bill will apply to tax years beginning on or after January 1, 2026.

Affected Parties

  • Individuals: The primary beneficiaries of this bill are workers in industries where cash tipping is prevalent. This includes waitstaff, bartenders, taxi drivers, and other service workers who rely on tips as a significant part of their income.
  • Employers: Employers will need to adjust their payroll and reporting practices to accommodate the changes in tax calculations related to cash tips.

Procedural Aspects

  • Legislative Status: The bill was introduced on February 12, 2025, and has been referred to the Ways and Means Committee for further consideration.
  • Next Steps: The bill will undergo discussions and potential amendments in the committee before it can be voted on by the full legislative body.

Conclusion

HF 361 represents a significant change in tax policy regarding cash tips, aiming to provide financial relief to individuals who depend on tips as part of their income. If enacted, it will take effect for the 2026 tax year, potentially impacting the financial landscape for many workers in the service sector.

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

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