RALEIGH — A bill filed in the state House is proposing “no tax on tips” for service industry workers as well as on overtime pay and bonus pay.
House Bill 11 has four primary sponsors: Reps. Harry Warren (R-Rowan), John Bell (R-Wayne), Allen Chesser (R-Nash) and Erin Paré (R-Wake).
“This is a common-sense way to reward hardworking hourly employees who go above and beyond to support their families,” Warren said in a press release. “It also incentivizes workers to take on extra shifts and helps employers fill vacant positions.”
“Many hourly workers rely on tipped and overtime wages to pay their bills,” said Bell. “By allowing these folks to keep more of their hard-earned money, this bill increases take-home pay, supports job growth and honors the value of hard work.”
The bill proposes a set of new income tax deductions for the three aforementioned categories and would allow taxpayers to deduct all overtime compensation earned under the Fair Labor Standards Act, up to $2,500 in bonus pay and any tips that are required to be reported to their employer.
For married couples filing jointly, each spouse would be able to qualify separately for the overtime and bonus pay deductions.
The bill defines bonus pay as supplemental wages paid as cash awards in recognition of outstanding work, suggestions or similar workplace dedication but explicitly excludes tips from this definition.
The proposed changes would take effect for tax years beginning Jan. 1, 2025, or later, and taxpayers would need to provide any information required to claim the deductions.
House Bill 11 is similar to President Donald Trump’s campaign promise to end taxes on tips, which he has continued to push since taking the oath of office and will need Congress’ help to enact.
A recent poll by The Associated Press-NORC Center for Public Affairs Research shows 54% of Americans “strongly” or “somewhat” approve of ending taxes on tips, while 23% “neither favor nor oppose” such a proposal. Twenty-two percent responded as being “strongly” or “somewhat” against the move.
