Rehberg Sponsors Bill to Protect Tip Income from Federal Taxes
WASHINGTON, DC - Montana's Congressman, Denny Rehberg, is sponsoring legislation to provide a significant tax break to the thousands of Montana workers relying on tips to supplement their hourly wages. The Rehberg-sponsored legislation would exempt the first $10,000 of tip income earned from federal taxes. Tip income would be exempt from both income and FICA taxes under the Rehberg-sponsored bill, known as the "Tip Tax Bill."
Rehberg's support of the Tip Tax Bill follows his August vote to boost the federal minimum wage by 41 percent to $7.25 an hour. The minimum wage hike, the first since 1997, will benefit 15 million American workers.
"The Tip Tax Bill will really benefit the thousands of Montanans that rely on tips for a significant portion of their incomes," said Rehberg, a member of the House Appropriations Committee. "Combine this with the minimum wage increase, and wages are going to rise for thousands of Montana workers. Often times, employees that receive tips work in jobs that pay minimum wage so their tip income is vital. They are mostly students and single moms who need the boost in take-home pay this bill provides."
Under current law, service employees earning tips are assumed by the IRS to have made at least 8 percent of their gross sales in tips. The 8 percent tax is applied regardless of the level of the actual tip. Additionally, the IRS requires any tips above 8 percent be reported for tax purposes.
"This is a bill that just makes sense for tens of thousands of Americans" added Rehberg. "It protects workers from being taxed on income they may not even earn and that's good news."