AB-1550 • 2026

Personal income taxes: deductions: tips: overtime compensation.

Taxes

Passed Legislature

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

Sponsor: Sanchez
Last action: 2026-04-06
Official status: In committee: Set, second hearing. Referred to REV. & TAX. suspense file.
Effective date: Not listed

Plain English Breakdown

The official source material does not provide details on the specific requirements or limitations regarding the amounts of qualified tips and overtime compensation that can be deducted.

Personal Income Taxes: Deductions for Tips and Overtime

AB-1550 allows taxpayers to deduct qualified tips and overtime compensation from their personal income taxes, in addition to the standard deduction.

What This Bill Does

Allows taxpayers to deduct qualified tips received during a taxable year.
Permits deductions for qualified overtime compensation received by taxpayers.
These deductions can be taken along with the standard deduction.

Who It Names or Affects

Taxpayers who receive tips or earn overtime compensation.

Terms To Know

Qualified Tips: Tips that meet certain criteria set by federal income tax laws.
Qualified Overtime Compensation: Overtime pay that meets specific requirements under federal income tax laws.

Limits and Unknowns

The bill only applies to taxable years starting on or after January 1, 2026, and before January 1, 2029.
It does not specify the exact limits for the amount of tips and overtime compensation that can be deducted.

Bill History

2026-04-06 California Legislative Information
In committee: Set, second hearing. Referred to REV. & TAX. suspense file.
2026-03-17 California Legislative Information
Re-referred to Com. on REV. & TAX.
2026-03-16 California Legislative Information
From committee chair, with author's amendments: Amend, and re-refer to Com. on REV. & TAX. Read second time and amended.
2026-03-16 California Legislative Information
In committee: Set, first hearing. Hearing canceled at the request of author.
2026-02-02 California Legislative Information
Referred to Com. on REV. & TAX.
2026-01-08 California Legislative Information
From printer. May be heard in committee February 7.
2026-01-07 California Legislative Information
Read first time. To print.

Official Summary Text

AB 1550, as amended, Sanchez.
Personal income taxes: deductions: tips: overtime compensation.
The Personal Income Tax Law, in modified conformity with federal income tax laws, allows various deductions in calculating taxable income and allows a taxpayer to elect to take a standard deduction in lieu of itemizing deductions. Existing federal income tax law, for taxable years beginning before January 1, 2029, allows deductions in determining taxable income, as defined, for amounts equal to the qualified tips, as defined, and qualified overtime compensation, as defined, received by a taxpayer during the taxable year, not to exceed certain amounts, as specified.
This bill would, for taxable years beginning on or after January 1, 2026, and before January 1, 2029, conform to federal income tax law with regard to qualified tips and qualified overtime
compensation, except as specified.
compensation.
The bill would, in that regard, allow the above-described deductions to be taken in addition to the standard deduction.
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 also would include additional information required for any bill authorizing a new tax expenditure.
This bill would take effect immediately as a tax levy.

Current Bill Text

Read the full stored bill text

Download Bill PDF