an income tax exemption for cash tips paid to an employee

Wisconsin Legislature: SB36: Text as Enrolled

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SB36: Text as Enrolled

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Date of enactment:
2025 Senate Bill 36

Date of publication*:
2025 WISCONSIN ACT
An Act

to amend
71.52 (6);
to create
71.05 (6) (b) 57. of the statutes;
relating to:
an income tax subtraction for qualified tips.
The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:
SB36,1
Section

1
.
71.05 (6) (b) 57. of the statutes is created to read:
71.05
(6)
(b) 57. a. Subject to the limitation under subd. 57. b., for taxable years beginning after December 31, 2024, and before January 1, 2029, the amount that the claimant may deduct under section 224 of the Internal Revenue Code in effect for federal purposes on the claimant’s federal income tax return for the taxable year to which the claim under this subdivision relates.
b. For an individual who is a part-year resident or nonresident of this state, the subtraction under this subdivision for the taxable year may not exceed the amount that is calculated by multiplying the amount that the individual may deduct under section 224 of the Internal Revenue Code in effect for federal purposes on the individual’s federal income tax return by a fraction the numerator of which is the individual’s qualified tips that are taxable by this state and the denominator of which is the individual’s total qualified tips.
c. In this subdivision, “qualified tips” has the meaning given in section 224 (d) of the Internal Revenue Code in effect for federal purposes.
SB36,2
Section

2
.
71.52 (6) of the statutes is amended to read:
71.52
(6)
“Income” means the sum of Wisconsin adjusted gross income and the following amounts, to the extent not included in Wisconsin adjusted gross income: maintenance payments (except foster care maintenance and supplementary payments excludable under section 131 of the internal revenue code), support money, cash public assistance (not including credit granted under this subchapter and amounts under s. 46.27, 2017 stats.), cash benefits paid by counties under s. 59.53 (21), the gross amount of any pension or annuity (including railroad retirement benefits, all payments received under the federal social security act and veterans disability pensions), nontaxable interest received from the federal government or any of its instrumentalities, nontaxable interest received on state or municipal bonds, worker’s compensation, unemployment insurance, the gross amount of “loss of time” insurance, compensation and other cash benefits received from the United States for past or present service in the armed forces, scholarship and fellowship gifts or income, capital gains, gain on the sale of a personal residence excluded under section 121 of the internal revenue code, dividends, income of a nonresident or part-year resident who is married to a full-year resident, housing allowances provided to members of the clergy, the amount by which a resident manager’s rent is reduced, nontaxable income of an American Indian,
any amount subtracted under s. 71.05 (6) (b) 57.,
nontaxable income from sources outside this state and nontaxable deferred compensation. Intangible drilling costs, depletion allowances and depreciation, including first-year depreciation allowances under section 179 of the internal revenue code, amortization, contributions to individual retirement accounts under section 219 of the internal revenue code, contributions to Keogh plans, net operating loss carry-backs and carry-forwards, capital loss carry-forwards, and disqualified losses deducted in determining Wisconsin adjusted gross income shall be added to “income”. “Income” does not include gifts from natural persons, cash reimbursement payments made under title XX of the federal social security act, surplus food or other relief in kind supplied by a governmental agency, the gain on the sale of a personal residence deferred under section 1034 of the internal revenue code or nonrecognized gain from involuntary conversions under section 1033 of the internal revenue code. Amounts not included in adjusted gross income but added to “income” under this subsection in a previous year and repaid may be subtracted from income for the year during which they are repaid. Scholarship and fellowship gifts or income that are included in Wisconsin adjusted gross income and that were added to household income for purposes of determining the credit under this subchapter in a previous year may be subtracted from income for the current year in determining the credit under this subchapter. A marital property agreement or unilateral statement under ch. 766 has no effect in computing “income” for a person whose homestead is not the same as the homestead of that person’s spouse.
SB36,3
Section

3
. Initial applicability.
(
1
)
Definition of income for homestead credit.
The treatment of s. 71.52 (6) first applies to claims filed for taxable years beginning after December 31, 2024.

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