This bill amends Section 422.7 of the Iowa Code to exempt certain qualified tips from the individual income tax calculation for taxpayers with a net income of less than $155,000. Specifically, it allows these individuals to subtract up to $25,000 of qualified tips received, which are defined as cash tips from occupations that traditionally received such tips before December 31, 2023. The bill mandates that the Department of Revenue adopt rules to administer this new provision.

The applicability of this bill is contingent upon the federal government not enacting legislation that allows for the deduction of qualified tips for federal individual income tax purposes. If such federal legislation is enacted, the provisions of this bill will not apply in the same tax year. The bill is set to take effect for tax years beginning on or after January 1, 2026.

Statutes affected:
Introduced: 422.7