Authorizes an income tax deduction for tip income earned by taxpayers at or below certain income levels (OR DECREASE GF RV See Note)
Summary
HB 198 creates a new Louisiana individual income tax deduction for certain tip income earned by resident taxpayers beginning with taxable periods on or after January 1, 2026. The bill defines tip income to include tips reported on IRS Form W-2 as social security tips or allocated tips, plus certain cash and charge tips reported on IRS Form 4137. The deduction is tied to adjusted gross income and phases down as income rises.
For single, head of household, and married-separate filers, the full deduction is available at $61,000 or less of adjusted gross income and phases out in 20% increments until it ends at $65,000. For married-joint filers and qualified surviving spouses, the full deduction is available at $122,000 or less and phases out until it ends at $130,000. The bill also includes a sunset provision: the deduction terminates if federal law is amended to eliminate federal income tax on tip income.
Impact
The bill would amend Louisiana’s individual income tax statutes by adding a new deduction from tax table income and by incorporating that deduction into the statutory definition of tax table income. Its practical effect would be to reduce state taxable income for eligible tipped workers, lowering their Louisiana income tax liability and potentially reducing state general fund revenue. The deduction is limited to resident taxpayers and is scheduled to take effect for tax years beginning in 2026.
Sentiment
Based on the bill text and the absence of recorded committee debate or votes in the provided materials, the overall sentiment appears supportive and policy-driven, aimed at providing tax relief to tipped workers. The bill’s structure suggests a targeted benefit for lower- and middle-income earners in service occupations, with no evidence in the record provided of organized opposition or amendment activity. The fiscal note in the caption indicates an expected negative impact on the general fund revenue, which is the main policy tradeoff reflected in the filing.
Contention
The main point of contention is likely fiscal: the bill reduces state income tax collections, as noted by the caption’s reference to a decrease in general fund revenue. Another possible issue is equity and scope, since the deduction is limited to resident taxpayers below specified income thresholds and applies only to reported tip income, which may raise questions about who benefits and how tips are documented. The sunset provision tied to future federal tax changes could also be debated because it makes the state deduction contingent on federal action rather than permanent state policy.