TIP Improvement Act of 2026
Sponsored By: Representative Horsford, Steven [D-NV-4]
Introduced
Summary
Raises the tipped base wage to the regular minimum wage. This bill would also expand and make permanent a tax deduction for qualified tips while adding reporting and anti-fraud rules to strengthen tip enforcement.
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- Tipped workers: Employers would have to pay tipped employees the regular minimum under the Fair Labor Standards Act. Workers could still pool tips with colleagues who customarily and regularly receive them.
- Employers: The bill broadens penalties by replacing references to tips "unlawfully kept" with "unlawfully used or kept," which increases employer liability for mishandled tips.
- Tax filers and service workers: It makes the qualified tip deduction permanent, raises the individual cap to $25,000 and the joint cap to $50,000, requires taxpayer identification numbers to claim the deduction, adds anti-fraud limits on who can pay reported tips, and treats automatic gratuities in hospitality, food and beverage service, and cosmetology as qualifying tips. The tax changes apply to taxable years beginning after December 31, 2025.
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Bill Overview
Analyzed Economic Effects
2 provisions identified: 1 benefits, 0 costs, 1 mixed.
Expanded tip tax deduction rules
If enacted, this would make the qualified tip deduction permanent and raise the joint-return cap so married filers could claim up to $50,000 instead of $25,000. It would treat some automatic gratuities as qualifying tips for hospitality, food and beverage service, and cosmetology workers. You would have to include a taxpayer identification number on your return to claim the deduction. The deduction would not be allowed if you own the business that employs you or if the tip payer is related to you under section 267(b). This would apply to tax years beginning after December 31, 2025.
Higher pay and tip protections for workers
If enacted, this would require employers to pay tipped workers the federal minimum wage (the wage in FLSA section 6(a)(1)). You would keep all tips you receive, though employers could still require pooling among staff who customarily and regularly get tips. If an employer uses or keeps tips improperly, you would be able to recover a broader set of tip amounts under the FLSA.
Sponsors & CoSponsors
Sponsor
Horsford, Steven [D-NV-4]
NV • D
Cosponsors
There are no cosponsors for this bill.
Roll Call Votes
No roll call votes available for this bill.
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