H.R. 6295

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6295 Introduced in House (IH)]

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119th CONGRESS
1st Session
H. R. 6295

To amend the Internal Revenue Code of 1986 to permanently exclude from 
gross income certain reported tips for workers in eligible service 
sectors, to better support low- and moderate-income earners, and for 
other purposes.

_______________________________________________________________________

IN THE HOUSE OF REPRESENTATIVES

November 25, 2025

Mr. Davis of North Carolina introduced the following bill; which was 
referred to the Committee on Ways and Means

_______________________________________________________________________

A BILL

To amend the Internal Revenue Code of 1986 to permanently exclude from 
gross income certain reported tips for workers in eligible service 
sectors, to better support low- and moderate-income earners, and for 
other purposes.

Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as ``The Working for Tips Tax Relief Act of 
2025''.

SEC. 2. EXCLUSION FROM GROSS INCOME FOR CERTAIN REPORTED TIPS.

(a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by inserting after section 
139J the following new section:

``SEC. 139K. EXCLUSION OF CERTAIN REPORTED TIPS.

``(a) In General.--There shall be allowed as a deduction an amount 
equal to the qualified tips received during the taxable year that are 
included on statements furnished to the individual pursuant to section 
6041(d)(3), 6041A(e)(3), 6050W(f)(2), or 6051(a)(18) of Public Law 119-
21, or reported by the taxpayer on Form 4137 (or successor).
``(b) Limitation.--
``(1) In general.--The amount allowed as a deduction under 
this section for any taxable year shall not exceed $35,000.
``(2) Limitation based on adjusted gross income.--
``(A) In general.--The amount allowable as a 
deduction under subsection (a) (after application of 
paragraph (1)) shall be reduced (but not below zero) by 
$50 for each $500 by which the taxpayer's modified 
adjusted gross income is between $50,000 and $75,000 
($100,000 and $150,000 in the case of a joint return), 
and no such tax exclusion shall apply to individuals 
with AGI over $75,000 ($150,000 in the case of a joint 
return).
``(B) Modified adjusted gross income.--For purposes 
of this paragraph, the term `modified adjusted gross 
income' means the adjusted gross income of the taxpayer 
for the taxable year increased by any amount excluded 
from gross income under section 911, 931, or 933 of 
Public Law 119-21.
``(c) Living Wage Indexing.--The Secretary shall review annually 
the national and regional living wage estimates and may adjust the 
exclusion or eligibility thresholds accordingly.
``(1) Initial treatment.--This section shall apply to all 
taxable years beginning after December 31, 2025, and shall 
expire to the taxable year beginning on December 31, 2028.
``(2) Reporting and evaluation.--The Secretary shall submit 
biennial reports to Congress beginning July 1, 2027, assessing:
``(A) Utilization of the exclusion by sector and 
income bracket.
``(B) Effects on workforce participation and wage 
equity.
``(C) Recommendations for enhancement.
``(d) Tips Received in Course of Trade or Business.--In the case of 
qualified tips received by an individual during any taxable year in the 
course of a trade or business (other than the trade or business of 
performing services as an employee) of such individual, such qualified 
tips shall be taken into account under subsection (a) only to the 
extent that the gross income for the taxpayer from such trade or 
business for such taxable year (including such qualified tips) exceeds 
the sum of the deductions (other than the deduction allowed under this 
section) allocable to the trade or business in which such qualified 
tips are received by the individual for such taxable year.
``(d) Qualified Tips.--
``(1) In general.--The term `qualified tips' means cash 
tips received by an individual in an occupation which 
customarily and regularly received tips on or before December 
31, 2024, as provided by the Secretary.
``(2) Exclusions.--Such term shall not include any amount 
received by an individual unless--
``(A) such amount is paid voluntarily without any 
consequence in the event of nonpayment, is not the 
subject of negotiation, and is determined by the payor,
``(B) the trade or business in the course of which 
the individual receives such amount is not a specified 
service trade or business (as defined in section 
199A(d)(2)), and
``(C) such other requirements as may be established 
by the Secretary in regulations or other guidance are 
satisfied. For purposes of subparagraph (B), in the 
case of an individual receiving tips in the trade or 
business of performing services as an employee, such 
individual shall be treated as receiving tips in the 
course of a trade or business which is a specified 
service trade or business if the trade or business of 
the employer is a specified service trade or business.
``(3) Cash tips.--The term `cash tips' includes tips 
received from customers that are paid in cash or charged and, 
in the case of an employee, tips received under any tip-sharing 
arrangement.
``(e) Social Security Number Required.--
``(1) In general.--No deduction shall be allowed under this 
section unless the taxpayer includes on the return of tax for 
the taxable year such individual's social security number.
``(2) Social security number defined.--The term `social 
security number' shall have the meaning given such term in 
section 24(h)(7).
``(f) Married Individuals.--If the taxpayer is a married individual 
(within the meaning of section 7703), this section shall apply only if 
the taxpayer and the taxpayer's spouse file a joint return for the 
taxable year.
``(g) Regulations.--The Secretary shall prescribe such regulations 
or other guidance as may be necessary to prevent reclassification of 
income as qualified tips, including regulations or other guidance to 
prevent abuse of the deduction allowed by this section.''.
(b) Deduction Allowed to Non-Itemizers.--Section 63(b) is amended 
by striking ``and'' at the end of paragraph (3), by striking the period 
at the end of paragraph (4) and inserting ``, and'', and by adding at 
the end the following new paragraph:
``(5) the deduction provided in section 224.''.
(c) Omission of Correct Social Security Number Treated as 
Mathematical or Clerical Error.--Section 6213(g)(2), as amended by the 
preceding provisions of this Act, is amended by striking ``and'' at the 
end of subparagraph (W), by striking the period at the end of 
subparagraph (X) and inserting ``, and'', and by inserting after 
subparagraph (X) the following new subparagraph:
``(Y) an omission of a correct social security 
number required under section 224(e) (relating to 
deduction for qualified tips).''.
(d) Exclusion From Qualified Business Income.--Section 199A(c)(4) 
is amended by striking ``and'' at the end of subparagraph (B), by 
striking the period at the end of subparagraph (C) and inserting ``, 
and'', and by adding at the end the following new subparagraph:
``(D) any amount with respect to which a deduction 
is allowable to the taxpayer under section 224(a) for 
the taxable year.''.
(e) Published List of Occupations Traditionally Receiving Tips.--
Not later than 90 days after the date of the enactment of this Act, the 
Secretary of the Treasury (or the Secretary's delegate) shall publish a 
list of occupations which customarily and regularly received tips on or 
before December 31, 2024, for purposes of section 224(d)(1) of the 
Internal Revenue Code of 1986 (as added by subsection (a)).
(f) Withholding.--The Secretary of the Treasury (or the Secretary's 
delegate) shall modify the procedures prescribed under section 3402(a) 
of the Internal Revenue Code of 1986 for taxable years beginning after 
December 31, 2025, to take into account the deduction allowed under 
section 224 of such Code (as added by this Act).
(g) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2024, and ending 
December 31, 2026.
(h) Pilot Program.--Upon expiration of this section, the Secretary 
of the Treasury shall commence a pilot program to examine the potential 
benefits to extending the tipped wage tax exemptions as outlined in 
this section permanently and without expiration.
(i) Transition Rule.--In the case of any cash tips required to be 
reported for periods before January 1, 2026, persons required to file 
returns or statements under section 6041(a), 6041(d)(3), 6041A(a), 
6041A(e)(3), 6050W(a), or 6050W(f)(2) of the Internal Revenue Code of 
1986 (as amended by this section) may approximate a separate accounting 
of amounts designated as cash tips by any reasonable method specified 
by the Secretary.
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