Relating to establishing an additional modification reducing federal adjusted gross income relating to taxes on tips and overtime
Summary
House Bill 4963 would create a new personal income tax subtraction from federal adjusted gross income for certain tip income and overtime compensation. For tax years beginning on or after January 1, 2026, and before January 1, 2029, taxpayers could reduce West Virginia taxable income by the amount of qualified tips and qualified overtime compensation deducted on their federal return for the same year. The bill also provides that nonresidents may claim the subtraction only for tips and overtime attributable to services performed in West Virginia.
Beginning in tax years on or after January 1, 2029, the bill shifts to a more specific state subtraction structure. It would allow up to $25,000 annually for qualified tips and up to $12,500 annually for qualified overtime compensation, with both benefits phased out for taxpayers with modified adjusted gross income above $150,000. The subtraction would be available regardless of filing status, and the nonresident sourcing rule would continue to limit the benefit to West Virginia-earned income.
Impact
The bill would amend West Virginia’s personal income tax law by adding a new section to Article 21 of Chapter 11, creating an additional modification to federal adjusted gross income for tips and overtime. It would reduce taxable income for eligible workers, potentially lowering state income tax liability for employees who receive tipped wages or overtime pay, while also limiting the benefit for higher-income taxpayers through a phaseout beginning at $150,000 of modified adjusted gross income. The measure would also require sourcing rules for nonresidents, restricting the subtraction to income earned from services performed in the state.
Sentiment
The available record shows no committee transcript, recorded votes, or formal amendments, so there is no documented debate to indicate strong support or opposition. Based on the bill’s structure, the measure appears designed to provide tax relief to workers who rely on tips and overtime, which suggests a generally favorable policy intent. The absence of recorded opposition or vote history means the overall sentiment cannot be measured from the provided materials beyond the bill’s apparent pro-worker tax-relief framing.
Contention
The main policy questions raised by the text are who should benefit and how broadly the tax relief should apply. The bill phases out the benefit for taxpayers above $150,000 in modified adjusted gross income, which reflects a concern about limiting relief to lower- and middle-income workers, but could also be a point of debate for those who favor a broader tax cut. Another potential point of contention is the treatment of nonresidents, since only income attributable to work performed in West Virginia would qualify, and the bill’s two-stage structure—an initial 2026-2028 approach followed by a more defined 2029 framework—may also invite questions about administrative complexity and implementation.