TIP Improvement Act of 2026
Rep. Horsford Introduces TIP Improvement Act to End Tipped Minimum Wage and Expand Tax Breaks
Legislative Progress
Key Points
- This bill would stop employers from paying tipped workers a lower base wage. Right now, many servers and bartenders are paid a 'tipped minimum wage' that is much lower than the standard rate. This change would require businesses to pay the full federal minimum wage before any tips are added.
- The plan makes a tax deduction for tips permanent and doubles the amount for married couples. Under this rule, married couples who both work for tips could deduct up to $50,000 of that income from their taxes. This is designed to help service workers keep more of the money they earn from customers.
- The bill includes 'automatic gratuities' in the tax-free category for people working in restaurants, hotels, and hair salons. This means the mandatory service charges often added to large group bills would be treated the same as regular tips for tax purposes, providing more consistent take-home pay.
- To prevent people from abusing the system, the bill adds strict anti-fraud rules. Workers cannot claim these tax breaks on tips given by family members, and business owners cannot claim tips if they have an ownership stake in the company where they work. All workers must also provide a valid tax ID number to get the deduction.
Impact Analysis
Personal Impact
Life & Work
Restaurants, bars, salons, and hotels that currently pay the lower tipped minimum wage would have to pay the full federal minimum wage to all tipped employees. This could significantly increase labor costs for small businesses in the hospitality and food service industries, potentially leading to higher menu prices, reduced hours for workers, or changes in staffing. The anti-fraud provisions also prevent business owners from claiming the tip deduction on any tips they receive from their own businesses.
Programs
Milestones
Referred to the Committee on Ways and Means, and in addition to the Committee on Education and Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Sent to a congressional committee for expert review. The committee decides whether this bill moves forward.
Introduced in House
The bill was officially filed and given a number. It now enters the legislative queue.
Votes
No votes have been recorded for this legislation yet.
Related News
3 articlesLas Vegas Culinary Union pushes to make 'No Taxes on Tips' permanent
The Culinary Union and Rep. Steven Horsford are advocating for the TIP Improvement Act to make tip tax deductions permanent and eliminate the federal subminimum wage. The bill aims to fix the 'marriage penalty' by doubling the deduction for couples and including automatic gratuities as tips.
Horsford Unveils TIP Improvement Act: Legislation Crafted by Workers, for Workers
Rep. Steven Horsford introduced the TIP Improvement Act to modernize federal tipped wage policy. Key provisions include ending the $2.13 subminimum wage, doubling the tip tax deduction for married couples to $50,000, and ensuring automatic gratuities are treated as tax-free tips for workers.
Will Nevada have a Mamdani? Insurgent challengers hope for better chances in 2026
The Culinary Union is leveraging the introduction of the TIP Improvement Act to mobilize its members for the 2026 cycle. The bill, introduced by Rep. Horsford, addresses the 'marriage penalty' in tip deductions and seeks to eliminate the federal subminimum wage for tipped employees.
Source Information
Document Type
Congressional Bill
Official Title
TIP Improvement Act of 2026
Data Sources
Sponsor
Analysis generated by AI. Always verify with official sources.