Senator Rosilicie Ochoa Bogh announced on May 7 that Senate Bill 984, which would let tipped workers deduct qualifying tips from their state income taxes, has advanced out of the Senate Revenue and Taxation Committee.
The bill matters because it aims to align California’s tax law with federal law, providing relief for service workers who depend on tips as a significant part of their income. Many tipped workers in California are women, students, and single parents who rely on gratuities to support themselves.
“California is one of the most expensive places in the country to live. For many working families, tips are not just a gesture of gratitude for going above and beyond their duties, they provide a tangible benefit to workers who are essential to our state’s economy,” said Senator Ochoa Bogh. “I am grateful that SB 984 is advancing in the legislative process. Passage of this bill will allow tipped workers to keep more of what they earn and ensure they are not excluded from a tax break already available at the federal level.”
If passed into law, SB 984 would permit employees and self-employed individuals in tip-based jobs to deduct qualified tips from their state income taxes for tax years 2026 through 2028. The deduction would apply only to voluntary tips received in occupations that customarily earned tips before the end of 2024 and would phase out for higher-income taxpayers. Unlike federal law, claimants could use either a Social Security Number or an Individual Taxpayer Identification Number.
“Hardworking Californians should be allowed to keep more of the tips they earn,” said Senator Shannon Grove, joint author of the bill. “A state tax break on tips means service workers can actually take home the extra money customers give them for the great service they provide. When we make these jobs more rewarding, it helps local businesses and neighborhoods thrive while making these important professions even more appealing.”
The bill keeps existing reporting requirements; employees must still report all tips received to employers who continue reporting wages with qualified tips listed separately. Professions such as law, finance, accounting, consulting, and performing arts are excluded from eligibility.
“The California Restaurant Association supports common sense state tax policies that support restaurant viability, including providing tax relief to tipped workers and their families,” said Matt Sutton, Senior Vice President at the association. “Thirty-six states already automatically provide this tax relief to their tipped workforce. SB 984 simply allows California employees the same tax relief already enjoyed by similarly situated tipped employees in other states. We are beyond grateful for Senator Ochoa Bogh’s leadership here.”
“SB 984 provides much-needed clarity for tipped workers by creating a uniform standard for taxpayers to follow,” said Scott Kaufman, Legislative Director for the Howard Jarvis Taxpayers Association.
Supporters say aligning state policy with federal rules could offer targeted help for those employed in hospitality and service industries across California.
