Federal deduction for qualified tip income adoption

This bill (SF 3738) creates a Minnesota state income tax deduction for qualified tip income, aligning the state tax code with the federal Internal Revenue Code. It directly affects Minnesota taxpayers who earn tips, allowing them to deduct qualified tips on their state tax returns starting in 2025 (retroactively). The key provision adopts the federal deduction method for tips, as defined under Internal Revenue Code section 224, and applies to taxable years beginning after December 31, 2024. The deduction becomes effective for tax years beginning after December 31, 2028, but applies retroactively to 2025. This change simplifies tax filing for tipped workers by matching state and federal treatment of tip income.