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HB 5087

AN ACT ESTABLISHING PERSONAL INCOME TAX DEDUCTIONS FOR TIPS OR GRATUITIES AND OVERTIME PAY.

2026 Regular Session Introduced by Joe Hoxha

Connecticut bill creates personal income tax deductions for tips and overtime pay to reduce tax burden on service workers and employees working extended hours.

REF. TO JOINT COMM. ON Finance, Revenue and Bonding
#gratuities #incometaxdeductions(state)
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Bill Summary · HB 5087

Legislative bill overview

HB 5087 would establish personal income tax deductions for tips/gratuities and overtime pay earned by Connecticut residents. This means individuals could reduce their taxable income by the amount they receive in tips and gratuities, as well as compensation earned through overtime work. The bill aims to provide tax relief specifically targeting service workers and employees working extended hours.

Why is this important

Service industry workers and those working overtime often operate on tighter financial margins than salaried employees. This deduction could meaningfully increase take-home pay for waitstaff, bartenders, delivery drivers, and others relying on tips—potentially improving financial stability for lower-income workers. However, the fiscal impact on state tax revenue would need careful analysis, as Connecticut faces ongoing budget pressures.

Potential points of contention

  • Fairness concerns: Salaried employees wouldn't benefit from these deductions, raising questions about whether the tax code should favor certain income types over others
  • Revenue impact: Connecticut would lose tax revenue from affected workers, requiring offsetting revenue sources or spending cuts unless the state determines economic stimulus effects justify the loss
  • Compliance complexity: The IRS already requires tip reporting; allowing deductions could create administrative burdens for tax authorities and disputes over what qualifies as gratuities versus regular wages

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

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