Plain English Breakdown
The official text refers to a specific definition for 'tips' that is not included in the provided summary or digest.
Excluding Tips from State Taxes
AB-1443 excludes tips, as defined in the law, from state income tax and certain payroll taxes for taxable years between January 1, 2026, and December 31, 2030.
What This Bill Does
- Excludes tips, as defined by the bill, from gross income when calculating personal state income tax liability.
- Removes tips from the definition of wages for employer withholding of income taxes.
- Stops counting tips as wages when calculating unemployment insurance contributions.
- Stops counting tips as wages when calculating employment training tax payments.
- Applies these changes only to taxable years beginning on or after January 1, 2026, and before January 1, 2031.
Who It Names or Affects
- Employees who receive tips as defined by the law.
- Employers required to withhold taxes or pay unemployment insurance contributions.
- The Employment Development Department that administers state payroll taxes.
Terms To Know
- Gross income
- Total money earned before any deductions are taken out for tax purposes.
- Taxable years
- The specific time periods, usually calendar years, when the new rules apply to taxes.
Limits and Unknowns
- The bill states that tips are 'as defined' but does not provide the definition in this summary.
- The text mentions related changes to other provisions without listing them specifically.
- The effective date is listed as taxable years beginning on or after January 1, 2026.