Senator Ochoa Bogh (R-Yucaipa) along with joint author Senator Shannon Grove (R-Bakersfield), has announced that Senate Bill 984, legislation that would conform California tax law to federal law by allowing tipped workers to deduct qualifying tips from their state income taxes, has advanced out of the Senate Revenue and Taxation Committee.
Tipped workers make up a significant share of California’s service economy and often are women, students, and single parents who count gratuities as a substantial part of their earnings. While federal law now allows a deduction for tips, California law has not yet aligned with that change.
“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.”
SB 984 would allow employees and self-employed individuals in tip-based occupations 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 and regularly earned tips before the end of 2024 and would phase out for higher-income taxpayers.
Unlike federal law, this bill will allow either a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) to be used to claim the deduction.
“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 maintains existing reporting requirements to ensure transparency and accountability. Employees would still be required to report tips to their employer, and employers would continue reporting wages, with qualified tips identified separately. Certain professions, including law, finance, accounting, consulting, and the 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, Government Affairs and Public Policy for the California Restaurant 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.
By aligning state tax law with federal law, SB 984 provides targeted relief to workers employed in California’s world-class hospitality and service industries.