Referred to the Committee on Ways and Means, and in addition to the Committee on Education and Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
The TIP Improvement Act of 2026 makes two major changes to benefit tipped workers and service industry employees. First, it eliminates the separate minimum wage for tipped employees, requiring employers to pay tipped workers the full federal minimum wage (currently $7.25 per hour) rather than the current lower tipped minimum of $2.13 per hour, while allowing workers to keep all their tips. Second, the bill expands and makes permanent a tax deduction for service workers in hospitality, food and beverage, and cosmetology fields who receive tips, doubling the deduction limit for joint tax returns and including automatic gratuities like mandatory service charges. The legislation also adds safeguards to prevent fraud by requiring workers to have taxpayer identification numbers and limiting the deduction to workers without ownership stakes in their employers. These changes take effect for tax years beginning after December 31, 2025, and primarily affect restaurant workers, bartenders, hotel staff, and similar service employees across the country.
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