HF 1030 (LSB 2526HV (2) 91)

HOUSE FILE 1030

BY  COMMITTEE ON WAYS AND MEANS

(SUCCESSOR TO HF 268)

A BILL FOR

An Act exempting qualified tips from the individual income tax, and including applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 422.7, Code 2025, is amended by adding the following new subsection:
   NEW SUBSECTION.  45.  a.  For a taxpayer whose net income is less than one hundred fifty-five thousand dollars, subtract, to the extent included, the amount of qualified tips that were received and are included on statements furnished to an employer as required by section 6053(a) of the Internal Revenue Code, not to exceed twenty-five thousand dollars.
   b.  As used in this subsection:
   (1)  “Net income” means net income as properly computed under this section without regard to the deduction in this subsection.
   (2)  “Qualified tips” means any cash tip received by an individual in the course of such individual’s employment in an occupation that traditionally and customarily received cash tips before December 31, 2023.
   c.  The department shall adopt rules pursuant to chapter 17A to administer this subsection.
    Sec. 2.  CONTINGENT APPLICABILITY.  This Act applies to tax years beginning on or after January 1, 2026, unless the federal government enacts legislation allowing for the deduction of qualified tips for federal individual income tax purposes, and in such a case this Act does not apply in the same tax year where federal legislation allowing for the deduction of qualified tips for federal individual income tax purposes applies.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill excludes certain qualified tips from the calculation of net income for purposes of the individual income tax. An individual whose net income is less than $155,000, without regard to any deduction of qualified tips the individual received, is eligible to exclude up to $25,000 of such tips from the calculations of net income.
   The bill defines “qualified tips” to mean any cash tip received by an individual in the course of such individual’s employment in an occupation that customarily received cash tips prior to December 31, 2023.
   The department of revenue is required to adopt rules to administer the bill.
   The bill applies in tax years beginning on or after January 1, 2026, in the tax years where the federal government has not enacted similar legislation allowing for the deduction of qualified tips for purposes of the federal income tax.