SACRAMENTO, Calif. – Senator Ochoa Bogh (R-Yucaipa), joined by Senator Shannon Grove (R-Bakersfield) as joint author, announced the introduction of 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.
Tipped workers make up a significant share of California’s service economy and are more than twice as likely to live in poverty compared to non-tipped workers. Many are women, workers of color, and single parents who rely on tips to cover basic living expenses. 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, and for many working families, tips are a gesture of gratitude for going above and beyond their duties, helping keep food on the table and the lights on,” said Senator Ochoa Bogh. “This bill helps tipped workers keep more of what they earn and ensures they are not left out of a tax break 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.
“Hardworking Californians should be allowed to keep more of the tips they earn,” said Senator Shannon Grove. “By giving a state tax break on tips, servers, bartenders, delivery drivers, ride-share workers, and others in the service industry can actually take home the extra money customers give them for great service. When we make things better for these jobs, it helps our local businesses and neighborhoods thrive, and it makes these important roles 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.
By aligning state tax law with federal law, SB 984 provides targeted relief to workers who depend on tips.