TIP Improvement Act of 2026

HR 7577, the TIP Improvement Act of 2026, raises the minimum wage for tipped employees to the standard federal minimum wage (not the lower tipped wage) and requires employers to retain all tips for employees, allowing only permitted tip pooling. It also updates tax rules by doubling the qualified tip deduction limit for joint returns ($50,000), adding safeguards against fraud (like requiring tips be paid to unrelated individuals without business ownership ties), and including automatic gratuities in hospitality, food service, and cosmetology professions as deductible tips. The bill directly affects tipped workers in these industries by improving their pay security and tax benefits. Key provisions take effect for tax years beginning after December 31, 2025.