This bill proposes the addition of a new section, 11-21-12o, to the Code of West Virginia, aimed at creating a modification that reduces federal adjusted gross income for taxpayers in relation to taxes on tips and overtime. The modification will be applicable for taxable years starting from January 1, 2026, to January 1, 2029, allowing deductions for qualified tips and overtime compensation as defined by the Internal Revenue Code. For nonresidents, only tips and overtime earned from services performed within the state will qualify for this reduction.

Starting January 1, 2029, the bill continues to provide a modification for qualified tips and overtime compensation, with specific annual limits of $25,000 and $12,500, respectively. The modification will phase out for taxpayers with modified adjusted gross incomes exceeding $150,000, and it will be available regardless of the type of tax return filed. The bill emphasizes that nonresidents are only eligible for the modification based on services performed in West Virginia, ensuring that the benefits are localized to the state’s economy.

Statutes affected:
Introduced Version: 11-21-12o