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Bill

SB 694

Income Tax, state; subtractions for tips.

2026 Regular Session Introduced by Luther Cifers and 13 co-sponsors

Bill allows Virginia residents to subtract tip income from state taxable income, reducing state income taxes on service workers and tip-reliant earners.

Continued to next session in Finance and Appropriations (9-Y 4-N)
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Bill Summary · SB 694

Legislative bill overview

SB 694 proposes to allow Virginia taxpayers to subtract tips received from their state taxable income, similar to federal tax treatment. The bill would create a deduction specifically for tip income, reducing the state income tax burden on service industry workers and others who receive tips as part of their compensation.

Why is this important

Tips represent a significant portion of income for millions of workers in hospitality, food service, and other industries. Currently, Virginia taxes all tip income at full rates, which can create a heavier tax burden on workers whose compensation relies heavily on gratuities. This change would align Virginia's tax code with federal treatment and potentially provide meaningful relief to lower and middle-income workers.

Potential points of contention

  • Revenue impact: Allowing the subtraction would reduce state tax revenue, with fiscal implications that need to be weighed against other state priorities
  • Fairness concerns: Critics might argue this creates preferential treatment for certain workers over salaried employees, or raises questions about why tips deserve special treatment versus other forms of income
  • Implementation complexity: Determining what qualifies as tips, verifying reported tip income, and preventing abuse would require clear definitions and IRS coordination

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

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