Overtime pay and cash tips would be exempt from the individual income tax under two proposals advanced by a House committee Wednesday. The exemption would apply to tips adding up to $25,000 and to workers who make up to $155,000 per year.
House Democrats proposed similar amendments to Republican bills last month. In a news release, they estimated the changes would affect over 39,000 Iowa workers.
Rep. David Young. R-Van Meter, says the bill could increase retention rates in jobs where workers may feel undervalued.
“These are our fellow Iowans; they’re neighbors, they’re our friends, they’re in our community. And these might be, or might have been, us at one time.”
If passed, the changes would apply beginning in January 2026.
The committee has also advanced proposals to exempt laundry detergent, toilet paper and dietary supplements from the sales tax.