Bill > HB26

This bill amends Kentucky tax law to create income tax exclusions for tips and overtime compensation, starting in tax years beginning on or after January 1, 2026, and continuing until January 1, 2030. Specifically, the bill defines "tips" as amounts reported to an employer in accordance with federal tax law, including cash tips, electronic tips, noncash tips, and tips from tip pools or sharing arrangements. "Overtime compensation" is defined as pay for work exceeding 40 hours per week at a rate of at least 1.5 times the regular pay rate, as specified in the Fair Labor Standards Act. The bill requires the Kentucky Department of Revenue to report detailed information about these income exclusions to the Legislative Research Commission, including the location of taxpayers claiming the exclusion, total exclusion amounts, and a breakdown by income ranges. The bill also updates related tax forms and reporting requirements to reflect these new income exclusions, ensuring that tips and overtime compensation are separately listed on employee withholding statements. The reporting requirements are designed to help the General Assembly evaluate the effectiveness of these tax exclusions.

Budget and Finance

https://apps.legislature.ky.gov/record/25RS/hb26.html