Tip Tax Termination Act

Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 139I the following new section:

Gross income shall not include so much of the eligible tips received by an individual during the taxable year as does not exceed $20,000.

For purposes of this section, the term eligible tips means amounts received while performing services which constitute employment in a position which generally relies on tips as part of wages, including cosmetology, hospitality, and food service.

Except as provided in paragraph (2), any amount which is excluded from gross income under this section shall not be taken into account in determining any deduction or credit under this chapter.

The amount excluded from gross income under this section shall be taken into account for purposes of determining the credits under sections 24 and 32.

This section shall not apply to tips received after December 31, 2028.

Section 3121(a)(12) of such Code is amended by striking— and inserting Except as provided in section 139J—.

(A) tips tips

There are hereby appropriated to the Federal Old-Age and Survivors Insurance Trust Fund, the Federal Disability Insurance Trust Fund, and the Federal Hospital Insurance Trust Fund amounts equivalent to the reduction in revenues to each such Trust Fund, respectively, by reason of the amendment made by subparagraph (A) (determined without regard to this subparagraph). Amounts appropriated by the preceding sentence shall be transferred from the general fund at such times and in such manner as to replicate to the extent possible the transfers which would have occurred to such Trust Fund had this section not been enacted.

Section 3306(s) of such Code is amended by striking For purposes of this chapter and inserting Except as provided in section 139J, for purposes of this chapter,.

Section 3401(a)(16) of such Code is amended by striking— and inserting Except as provided in section 139J—.

(A) tips tips

The table of sections for part III of subchapter B of chapter 1 of such Code is amended by inserting after the item relating to section 139I the following new item:

The amendments made by this section shall apply to amounts received after December 31, 2023.