Illinois workers who rely on tips could soon qualify for a dollar-for-dollar tax deduction on the gratuities collected thanks to legislation recently filed by State Senator Craig Wilcox (R-McHenry).
“When customers enjoy their experience at a restaurant or other service-oriented business, the tip is a gesture of appreciation for a job well-done,” said Wilcox. “It is not part of an individual’s base salary and therefore should not be treated as taxable income.”
Through Wilcox’s Senate Bill 140, tipped workers would be able to receive an Illinois income tax deduction for gratuities that are included in their federal adjusted gross income. The deduction would match the amount of tips earned 100%. Workers would still have to list the amount of tips received on their tax return, but the tips would be exempt from Illinois’ 4.95% income tax.
“President Trump has expressed interest in removing taxes on tips, and some states are also taking steps to put ‘no tax on tips’ policies on the books, added Wilcox. “My SB 140 is pro-worker, pro-small business, and pro-taxpayer.”
According to Wilcox, his legislation would go far in addressing the significant labor shortage in the restaurant industry because it would increase interest in tipped work by potential employees by allowing tipped workers to keep more of their money.
The National Restaurant Association announced its support of “no tax on tips” policies in August of 2024.