Hochul proposes eliminating state taxes on tips of up to $25,000 a year

Gov. Kathy Hochul on Thursday proposed eliminating state taxes on tips of up to $25,000 a year, as a law that provides a similar federal tax deduction takes effect for 2025 tax-year filings.

"I’m kicking the new year off with a proposal of no state income tax on tips, continuing my efforts to make New York more affordable for hard working New Yorkers," the governor said in a statement.

Hochul said she would add the measure, which includes tips earned in the 2026 tax year, to her fiscal year 2027 budget proposal.

The tax deduction would make tipped professions more attractive, said Dorothy Roberts, president of the Long Island Hospitality Association. 

"It would benefit the workers, and it would also benefit any employers as far as retaining or attaining new hospitality workers," she said.

State Senate Democrats "have been supportive of similar proposals in the past and we will review this proposal and discuss as a conference," Senate Democratic spokesman Michael Murphy said in an email.

Sen. Jack Martins (R-Mineola) introduced a bill in January 2025 to establish a tax deduction for all tips received in cash, but the measure never made it out of committee. Martins did not respond to requests for comment on Thursday.

Murphy said the Martins bill had flaws, such as not including in its purview tips made by credit card.

President Donald Trump signed into law in July a bill that allows employees to deduct up to $25,000 in income received from tips from their gross income through the 2028 tax year.

The deduction does not affect workers with incomes too low to pay federal taxes, and the deduction is gradually phased out for those with incomes of more than $150,000, or $300,000 for joint filers.

Servers and bartenders are not the only ones who benefit from the federal break. Housekeepers, hairdressers and taxi and rideshare drivers are among others who qualify, Treasury Department guidelines show.

Asked whether Hochul’s proposal will contain similar provisions as the federal legislation, a spokeswoman for the governor said details of her budget plan would be released later this month.

Nassau County Executive Bruce Blakeman, the likely Republican candidate for governor, who earlier had criticized Hochul for not proposing a tax deduction for tipped income, said in a statement on Thursday: "I see Kathy Hochul is doing a u turn on taxing tips. I was told she changed her mind after I said I would never tax tips. Kathy if you want more of my ‘tips’ on how to govern just continue to follow my lead."

On Thursday, Hochul touted her proposal as part of her "affordability agenda" that includes tax refunds and cuts, increases in the child tax credit and an increase in the minimum wage.

"Affordability" has become a political catchword in recent months. New York City Mayor Zohran Mamdani, who was sworn in just after midnight Thursday, rocketed from obscurity to City Hall with a focus on improving affordability for New Yorkers.

By David Olson

david.olson@newsday.com@DavidOlson11

David Olson covers health care. He has worked at Newsday since 2015 and previously covered immigration, multicultural issues and religion at The Press-Enterprise in Southern California.