Bill > HB1562

This bill amends Virginia's tax code to provide a new income tax deduction for service industry workers starting in 2026. Specifically, the bill allows taxpayers to deduct the total amount of cash tips they received during the taxable year, provided those tips are reported on statements furnished to their employer as required by federal tax law (Section 6053(a) of the Internal Revenue Code). This means that workers in tip-based professions like restaurants, bars, and other service industries will be able to reduce their Virginia state taxable income by the full amount of cash tips they earn and officially report to their employer. The deduction applies to tax years beginning on or after January 1, 2026, giving workers an additional tax benefit that could help offset the impact of income taxes on tip earnings. By explicitly allowing this deduction, the bill recognizes the unique income structure of service workers who often rely significantly on tips as a substantial part of their total compensation.

Budget and Finance

https://lis.virginia.gov/bill-details/20251/HB1562