AB-1443 • 2026

Personal income taxes: unemployment insurance: tips.

Labor Taxes

Passed Legislature

This bill passed both chambers and reached final enrollment, even if later executive action is not shown here.

Sponsor: Castillo
Last action: 2025-06-05
Official status: From committee: Without further action pursuant to Joint Rule 62(a).
Effective date: Not listed

Plain English Breakdown

The official source material did not provide specific details on the exact changes made to other provisions or the impact of the tax expenditure.

Tax Changes for Tips

AB-1443 excludes tips from personal income taxes, unemployment insurance, and employment training tax for five years starting in 2026.

What This Bill Does

Excludes tips from gross income when calculating personal income taxes from January 1, 2026 to December 31, 2030.
Removes tips from the definition of wages used for unemployment insurance and employment training tax purposes starting in 2026.

Who It Names or Affects

People who earn income through tips, such as waiters or bartenders.
Employers who pay employees with tips.
The state's Employment Development Department which handles payroll taxes.

Terms To Know

Gross Income: Total earnings before any deductions are made for taxes and other expenses.

Limits and Unknowns

The bill only applies to tips earned between January 1, 2026 and December 31, 2030.
It does not specify how much money will be saved by people who earn tips under this new law.

Bill History

2025-06-05 California Legislative Information
From committee: Without further action pursuant to Joint Rule 62(a).
2025-04-28 California Legislative Information
In committee: Set, final hearing. Held under submission.
2025-04-21 California Legislative Information
In committee: Set, second hearing. Referred to suspense file.
2025-04-07 California Legislative Information
In committee: Set, first hearing. Hearing canceled at the request of author.
2025-03-17 California Legislative Information
Referred to Com. on REV. & TAX.
2025-02-24 California Legislative Information
Read first time.
2025-02-22 California Legislative Information
From printer. May be heard in committee March 24.
2025-02-21 California Legislative Information
Introduced. To print.

Official Summary Text

AB 1443, as introduced, Castillo.
Personal income taxes: unemployment insurance: tips.
The Personal Income Tax Law, in modified conformity with federal law, provides various exclusions from gross income in computing tax liability. Existing law requires employers to make specified payments and withholdings from wages paid for employment to, and to file reports of wages and make contributions for unemployment insurance and the employment training tax with, the Employment Development Department. The department is charged with administering the state’s payroll taxes.
This bill, for taxable years beginning on or after January 1, 2026, and before January 1, 2031, would exclude tips, as defined, from gross income for the purposes of the Personal Income Tax Law. The bill, on and after January 1, 2026, and until January 1, 2031, would also exclude tips from the definition of wages paid for employment for purposes of
income tax withholding and for purposes of unemployment insurance and the employment training tax. This bill would also make related changes to other provisions.
Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.
This bill would include additional information required for any bill authorizing a new tax expenditure.

Current Bill Text

Read the full stored bill text

Download Bill PDF