Michigan House Bill HB4051

Michigan 2025-2026 Regular Session

• Introduced: 1/30/25
• Refer: 1/30/25

Caption

House Bill 4051 of 2025

Summary

HB4051 amends Michigan’s Income Tax Act section 30, which defines “taxable income” for individual taxpayers and lists the additions and deductions used to calculate state income tax liability. The bill’s headline change is a new deduction for tipped employees beginning in tax years starting on or after January 1, 2025: taxpayers may deduct “proven gratuities” reported for federal payroll tax purposes, so long as those tips are included in adjusted gross income. The bill defines tipped employee and gratuities for this purpose and ties the deduction to amounts reported to the employer under the federal insurance contributions act. Beyond the tip-income provision, the bill largely restates and reorganizes a long list of existing Michigan income tax adjustments, including deductions and exemptions for retirement and pension income, Social Security, military pay, education savings accounts, ABLE accounts, first-time home buyer savings accounts, wrongful imprisonment compensation, disabled veteran student-loan discharge income, wagering losses, tribal-member nonbusiness income, and other specialized categories. It also preserves the personal exemption structure, age-based retirement-income limitations, and various inflation adjustments already embedded in the statute.

Impact

The bill would amend MCL 206.30, Michigan’s core individual income tax calculation statute, by adding a new state income tax deduction for reported tips received by tipped employees beginning in 2025. In practical terms, this would reduce taxable income for qualifying workers in occupations that regularly receive gratuities, lowering state income tax liability on those amounts. The bill does not create a separate tax credit or new filing category; instead, it changes the definition of taxable income within the existing income tax framework. Most of the remaining text continues current law on deductions, exemptions, and special exclusions, so the principal legal effect is the new treatment of gratuities for state income tax purposes.

Sentiment

The available context does not include committee testimony or recorded votes, so there is no direct evidence of legislative debate or partisan division in the materials provided. Based on the bill text and caption, the measure appears to be framed as a targeted tax relief proposal for tipped workers, which generally suggests a favorable policy posture toward service-industry employees. Because no votes or transcripts are included, overall sentiment can only be characterized as neutral-to-supportive from the bill’s design, rather than from documented legislative discussion.

Contention

The main policy issue raised by the bill is whether tips should be excluded from Michigan taxable income and how to define and verify eligible gratuities. The bill limits the deduction to “proven gratuities” reported for federal payroll tax purposes, which suggests concern about administrability and documentation. Potential points of contention could include revenue loss to the state, whether the deduction should apply broadly to all tipped workers or only certain occupations, and whether the state should rely on federal reporting rules to determine eligibility. No specific objections or amendments are shown in the provided materials, so these concerns are inferred from the structure of the proposal rather than from recorded debate.