In personal income tax, providing for tax paid on tipped wages.
Summary
HB1514 would amend Pennsylvania’s Tax Reform Code to create a new personal income tax credit for taxes paid on tipped wages. The credit would equal 100% of the state income tax attributable to tipped wages, be fully refundable, and be claimed using information provided by the employer on the employee’s tip statement. The Department of Revenue would be required to build the credit into the standard PA-40 return, and taxpayers would need to submit supporting paperwork to verify the amount of tipped income and the credit claimed.
The bill applies to taxable years beginning after December 31, 2025, and would take effect immediately upon enactment. In practical terms, it would reduce or eliminate Pennsylvania personal income tax liability on tip income for eligible workers, while also requiring the state to administer and process a new refundable credit within the existing tax filing system.
Impact
The bill would add a new section to the Tax Reform Code of 1971 governing personal income tax credits for tipped wages. It would affect taxpayers who receive voluntary customer-paid tips, employers that must furnish tip documentation under existing wage rules, and the Department of Revenue, which would need to update tax forms and procedures. Because the credit is refundable and tied to taxes already paid on tipped wages, it would reduce state revenue from affected tip income and create a new compliance and verification process for filers.
Sentiment
Based on the bill text and the absence of recorded committee discussion or votes, the available context suggests the measure is straightforward and policy-driven rather than highly contested in the record provided. The bill’s sponsors appear to support tax relief for tipped workers, and the proposal is framed as a targeted income tax benefit rather than a broad tax overhaul. No formal vote history or transcript comments are available here to indicate broader support or opposition.
Contention
The main policy questions raised by the bill are administrative and fiscal: whether a fully refundable credit for tipped wages is the best way to provide relief, how the Department of Revenue will verify tip amounts, and what the revenue impact will be on the Commonwealth. Potential points of contention could include whether the credit duplicates existing tax forgiveness provisions, whether it creates unequal treatment between tipped and non-tipped workers, and whether employers and taxpayers will face added paperwork. No specific objections or supporters are documented in the provided committee materials.
In personal income tax, further providing for classes of income; in corporate net income tax, further providing for definitions; and providing for personal health investment tax credit.