HB558, titled the Tip Tax Termination Act, would amend the Internal Revenue Code to exclude certain tipped wages from federal gross income for a temporary five-year period. The bill creates a new tax provision allowing individuals to exclude up to $20,000 in eligible tips per taxable year, with eligible tips defined as amounts received in jobs that generally rely on tips as part of wages, including cosmetology, hospitality, and food service.
The exclusion would apply to tips received after December 31, 2024, and would expire for tips received after December 31, 2029. The bill also directs the Treasury Department to adjust withholding tables and procedures to account for the new exclusion. It includes a rule preventing double benefits by disallowing the excluded income from being used for most deductions and credits, while still counting it for purposes of the Child Tax Credit and Earned Income Credit.
Impact
The bill would temporarily reduce federal income tax liability for workers in tipped occupations by removing qualifying tips from gross income up to the annual cap. It would require administrative changes to federal withholding systems and would affect the calculation of taxable income under the Internal Revenue Code, while preserving the use of excluded tips in determining eligibility for the Child Tax Credit and Earned Income Credit. The measure would primarily affect workers and employers in tip-dependent industries such as restaurants, hospitality, cosmetology, and related service sectors.
Sentiment
Based on the available context, the bill appears to have been introduced and referred to the House Committee on Ways and Means without recorded committee debate or votes. As a result, there is no documented floor or committee sentiment in the provided materials. The bill’s structure suggests a pro-worker, tax-relief approach aimed at tipped employees, but the available record does not show formal support or opposition from lawmakers in discussion.
Contention
No specific points of contention are documented in the provided committee transcripts or votes, because none are included. Potential areas of debate inherent in the bill include whether excluding tips from income taxes is an effective form of relief, how the $20,000 cap would be administered, whether the temporary five-year duration is sufficient, and how the exclusion might interact with fairness concerns for workers in non-tipped occupations. The bill’s carve-out preserving Child Tax Credit and Earned Income Credit calculations may also be a technical issue for tax policy reviewers.