Virginia Governor Glenn Youngkin, on December 16, 2024, unveiled a budget proposal aimed at lowering the cost of living for working families, by exempting service tips from being taxed for the state income tax.
According to the Governor’s office, the plan is expected to return approximately $70 million annually to Virginians, building on the over $5 billion in tax relief already implemented during his administration.
“We have delivered over $5 billion in tax relief to date, and we remain committed to lowering the cost of living for hardworking Virginians. It’s their money, not the government’s,” said Governor Glenn Youngkin. “By removing tips from taxable income, it will directly increase the take-home pay of hundreds of thousands of Virginians, and give them more buying power, which in turn will improve financial stability, stimulate local economies, and honor the value of their hard work.”
The Virginia Department of Taxation, and the Virginia Employment Commission estimate that the proposal could benefit more than 250,000 workers in industries such as, food service, personal care (including hair stylists), and hospitality (including bellhops and concierges). Workers who earn tips in other fields would also stand to gain from the proposed tax relief.
“Virginians who earn tips will be able to claim a deduction on their state tax return, provided the income is included in their federal adjusted gross income. The Department of Taxation will use IRS data and employer-reported W-2 information to ensure compliance,” it added.
