INC TX-DEDUCT TIPS AND OT
HB1750 amends the Illinois Income Tax Act to create two new individual income tax deductions: one for gratuities (tips) included in federal adjusted gross income and one for overtime compensation included in federal adjusted gross income. The bill places these deductions in Section 203 of the Act, making them part of Illinois’ existing subtraction modifications used to determine state base income. The measure is effective immediately, but the new deductions are written to apply beginning with taxable years on or after January 1, 2026.
The bill is narrowly focused on wage income and does not change the tax treatment of corporations, partnerships, or trusts beyond the existing structure of the Income Tax Act. For individual taxpayers, it would reduce Illinois taxable income by excluding qualifying tips and overtime pay from state income tax, which could lower tax liability for workers in tipped occupations and employees who regularly earn overtime. The bill also defines gratuities by reference to the Minimum Wage Law and overtime compensation by reference to the federal Fair Labor Standards Act.
Because the bill amends the state income tax base, its legal impact would be on the calculation of Illinois base income under the Illinois Income Tax Act, specifically by adding new subtraction modifications for individuals. It would not create a new credit or refund mechanism; instead, it changes the income base used to compute tax. The practical effect would be to reduce state revenue to the extent taxpayers claim the new deductions, while increasing after-tax income for eligible workers.
There is no recorded committee transcript, vote history, or other legislative debate in the provided materials, so the bill’s general sentiment cannot be measured from formal discussion. Based on the bill text and caption, the proposal appears to be framed as tax relief for working people, especially tipped workers and employees earning overtime. The absence of recorded opposition or amendments in the provided record means no clear consensus or controversy can be identified from the available history.
No specific points of contention are documented in the supplied materials, but likely policy issues would include the revenue impact on the state, whether the deductions should be limited by income level or occupation, and how to verify qualifying tips and overtime pay. The bill’s broad application to all taxpayers with qualifying income could also raise administrative questions for employers and the Department of Revenue.
HB1750 would amend Section 203 of the Illinois Income Tax Act to add two new individual subtraction modifications: one for gratuities included in federal adjusted gross income and one for overtime compensation included in federal adjusted gross income. This would lower Illinois base income for eligible taxpayers beginning with taxable years on or after January 1, 2026, reducing state income tax liability for workers who receive tips or overtime pay. The bill does not alter the tax rules for corporations, partnerships, or trusts, but it does change the state’s income tax base calculation for individuals and could reduce state revenue.
The provided record contains no committee transcripts and no voting history, so there is no documented floor or committee sentiment to summarize. From the bill text and caption, the measure appears to be presented as a tax-relief proposal for working taxpayers, particularly tipped employees and workers who earn overtime. No formal support or opposition is recorded in the materials supplied, so the overall sentiment can only be characterized as untested in the available legislative record.
No specific objections or negotiated changes are documented in the supplied materials. Potential areas of contention, based on the bill’s subject matter, would likely include the loss of state revenue, whether the deductions should be targeted to certain income groups or occupations, and the administrative burden of verifying tips and overtime compensation. Employers, tax administrators, and budget-focused lawmakers would be the most likely groups to raise implementation or fiscal concerns, while workers in tipped and overtime-heavy jobs would likely support the measure.